Capital goods for Modvat credit denied where gases were used only for repair, installation and maintenance of plant.

Oxygen and acetylene gases used for cutting, repairing, installation and maintenance of plant and machinery were not treated as capital goods for Modvat credit under Rule 57Q for the relevant period. The amended Notification No. 11/95-C.E. (N.T.) dated 16-3-1995 could not be applied retrospectively because the period in dispute predated its effective date. The use of the gases was found to be for keeping the plant operational, not for use in the actual process of manufacture of cement, so the earlier capital goods rulings based on manufacture-related use were distinguished. Modvat credit was therefore held not admissible.

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Issues: Whether oxygen and acetylene gases used for cutting, repairing, installation, and maintenance of plant and machinery could be treated as capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944, and whether the amended notification could be applied retrospectively to the relevant period.

Analysis: The relevant period preceded the effective date of Notification No. 11/95-C.E. (N.T.) dated 16-3-1995, so the amendment introducing clauses (d) and (e) could not govern the dispute. The findings below showed that the goods were used for installation, repairs, and maintenance of plant and machinery, and not in the actual process of manufacture of cement. On that footing, the use was for keeping the plant operational and not for producing or processing the final product. The earlier authorities on capital goods were distinguished because they proceeded on use in the manufacture process, not on repair or maintenance activities.

Conclusion: The goods did not qualify as capital goods for the relevant period, and Modvat credit was not admissible.

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