Boiler as capital goods: essential plant component qualifies for Modvat credit, and later inclusion is only clarificatory.

A boiler used in a sugar factory was treated as an essential and integral part of the plant and machinery because it supplied the energy required to run the manufacturing process. On that basis, it qualified as capital goods under Rule 57Q and Modvat credit was admissible. The later notification expressly including boilers in the capital goods list from 16-3-1995 was treated as clarificatory, not as creating a new entitlement. An item already falling within the functional concept of plant and machinery does not lose capital goods status merely because it was later specifically named.

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Issues: Whether a boiler used in the manufacture of sugar qualifies as capital goods under Rule 57Q and is eligible for Modvat credit, even though it was specifically included in the capital goods list only from 16-3-1995.

Analysis: The boiler was treated as an essential and integral part of the plant and machinery in the sugar factory, since it supplied the energy required to run the plant. The later notification including boilers was viewed as clarificatory rather than as creating a new entitlement. Reliance was also placed on the principle that an item already falling within the functional concept of plant and machinery does not cease to be capital goods merely because of later express inclusion in the list.

Conclusion: The boiler was held to be capital goods and Modvat credit was held admissible in favour of the assessee.

Ratio Decidendi: An item that is an essential and integral part of plant and machinery for manufacture is capital goods for Modvat purposes, and a later notification expressly including it is clarificatory if it merely declares an existing position.

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