Capital goods eligibility under Rule 57Q extends to auxiliary equipment used in the production process, not just direct manufacture.

Voltage stabilizers and voltage regulators were held eligible for Modvat credit as capital goods under Rule 57Q because the relevant test was whether the items functioned as machinery, apparatus or equipment used in the production process, including in an auxiliary or integral capacity. Direct use in the actual manufacture of yarn was not required, and items connected with textile plant and machinery could not be excluded merely for not participating immediately in production. The assessee's claim was upheld on that basis.

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Issues: Whether voltage stabilizers and voltage regulators were eligible as capital goods for Modvat credit under Rule 57Q of the Central Excise Rules.

Analysis: The items were not required to be used directly in the actual manufacture of yarn. The relevant test was whether the goods were machinery, apparatus or equipment used in the production process, including items that performed an auxiliary function. Authorities had already recognised eligibility for items such as transformers, electronic panels, voltmeters, ammeters, chilled water coils and weighing machines where they were integrally connected with production. On that approach, the stabilizers and regulators used in connection with the textile plant and machinery could not be excluded merely because they were not directly engaged in producing yarn.

Conclusion: The items qualified for Modvat credit as capital goods under Rule 57Q, and the assessee's claim was upheld.

Ratio Decidendi: Under Rule 57Q, capital goods eligibility extends to machinery or equipment that is used in an auxiliary or integral manner in the production process, even if it is not directly used in the actual manufacture of goods.

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