Accessories test for capital goods: plastic crates aiding production flow qualified for Modvat credit.

Plastic crates used to collect and shift machine outputs between stages of capacitor and resistor manufacture were treated as accessories of the machinery because they added to its convenience and effectiveness and aided the manufacturing process, even though the machinery could operate without them. On that basis, the crates qualified as capital goods under Rule 57AA and Modvat credit was admissible. The Revenue's challenge to the credit therefore failed.

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Issues: Whether plastic crates used for collecting and shifting machine outputs in the manufacture of capacitors and resistors qualified as accessories of the machinery under Rule 57AA, and thereby as capital goods eligible for Modvat credit.

Analysis: The relevant test was whether the item added to the convenience or effectiveness of the machinery, or was supplementary or secondary to the primary equipment, even if the machinery could function without it. Applying that test, the plastic crates were found to facilitate the effective handling of outputs between stages of production and to serve as an aid to the manufacturing machinery. They were therefore treated as accessories of the machinery used in manufacture.

Conclusion: The plastic crates were eligible as accessories under Rule 57AA, and the Revenue's challenge to the grant of Modvat credit failed.

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