Pre-amendment capital goods scope excluded internal handling cranes and unproven cables for Modvat credit.

Under the pre-amendment Rule 57Q definition of capital goods, only machines, machinery, plant, equipment, and their components, spare parts or accessories used in producing or processing goods, or in bringing about a change in the substance for manufacture, qualified for Modvat credit. EOT cranes used merely for internal movement of materials within the factory were held not to be machinery used for production or processing. Electric wires and cables also failed because no material showed that they were components or accessories of any qualifying machine. The wider definition effective from 16-3-1995 did not apply to the earlier period, so both items remained outside capital goods.

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Issues: Whether EOT cranes and electric wires and cables were eligible for Modvat credit as capital goods under Rule 57Q prior to the amendment with effect from 16-3-1995.

Analysis: The relevant definition of capital goods covered machines, machinery, plant, equipment and their components, spare parts and accessories used for producing or processing goods or for bringing about a change in the substance for manufacture of final products. EOT cranes were used only for transporting materials within the factory and were not machines or machinery used for producing or processing goods. As regards electric wires and cables, no material was shown to establish that they were components or accessories of any qualifying machine. The later expansion of the definition with effect from 16-3-1995 was not applicable to the earlier period under consideration.

Conclusion: EOT cranes and electric wires and cables were not covered by the pre-amendment definition of capital goods, and the Revenue's contention was accepted.

Final Conclusion: The reference was answered in favour of the Revenue on the scope of capital goods under Rule 57Q for the relevant period, and the application for reference was allowed.

Ratio Decidendi: Goods used merely for internal material handling, or items not shown to be components or accessories of qualifying machinery, do not fall within the pre-amendment definition of capital goods for Modvat credit.

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