Capital goods treatment under Rule 57Q extends to materials used to fabricate an integral chimney accessory for a diesel generating set.

Steel plates and M.S. channels used to fabricate a chimney for a diesel generating set were treated as eligible capital goods under Rule 57Q because the chimney functioned as an accessory and integral part for discharge of effluent gases. Applying the user test, the materials used in fabricating that eligible component were taken to be used for the purpose of capital goods in the factory. The assessee was therefore entitled to MODVAT credit, and the Revenue's challenge failed.

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Issues: Whether steel plates and M.S. channels used in fabricating a chimney for a diesel generating set qualify as capital goods under Rule 57Q of the Central Excise Rules, 1944 so as to entitle the assessee to MODVAT credit.

Analysis: Rule 57Q, as substituted by Notification No. 6/97-C.E. (N.T.) dated 01.03.1997, allows MODVAT credit on capital goods used in the factory of manufacture. The relevant inquiry is whether the goods in question, by reason of their use, fall within the description of capital goods or their components, spares or accessories. Applying the user test, the chimney was treated as an accessory of the diesel generating set and an integral part for discharge of effluent gases. The steel plates and M.S. channels were used in its fabrication and were therefore used for the purpose of an eligible capital good.

Conclusion: The assessee was entitled to MODVAT credit on steel plates and M.S. channels used in the fabrication of the chimney for the diesel generating set.

Final Conclusion: The Revenue's challenge to the grant of MODVAT credit failed, and the Tribunal's view that the subject items qualified for credit was sustained.

Ratio Decidendi: Goods used in the fabrication of an accessory or integral component of eligible plant or machinery can qualify as capital goods under Rule 57Q if the user test is satisfied.

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