Capital goods under Rule 57Q: equipment essential to calendering machinery qualified for Modvat credit on a clarificatory basis.

Goods installed in a factory to regulate input voltage, control machine speed and protect motors used in a calendering line were treated as capital goods under Rule 57Q because they were essential to the operation of machinery directly used in manufacture. The relevant tariff heading inserted by notification dated 16-3-1995 was regarded as clarificatory, supporting retrospective application. On that basis, the assessee was held entitled to Modvat credit on the disputed items.

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Issues: Whether the goods used for voltage regulation, speed control and protection of motors in the calendering line were capital goods under Rule 57Q and eligible for Modvat credit.

Analysis: The goods were installed and used in the factory to regulate input voltage, control machine speed and protect the driving motors. The calendering machine was directly used in the manufacture of the final product, and the disputed items were essential for its operation. The inclusion of the relevant tariff heading in Rule 57Q by the notification dated 16-3-1995 was treated as clarificatory, supporting retrospective application.

Conclusion: The goods qualified as capital goods under Rule 57Q and the assessee was entitled to the claimed Modvat benefit.

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