Capital goods under Modvat Rule 57Q included plant items essential to manufacturing and eligible for credit.

Grinding wheel, electric motor, gear pump, HRC fuse, static convertor, heat exchanger and cable were treated as capital goods for Modvat credit under Rule 57Q of the Central Excise Rules, 1944. Before 16-3-1995, the rule covered machines, machinery, equipment and their parts used for producing or processing dutiable final products, or for bringing about a change in any substance used in manufacture. On the facts, the items were found to be machines or parts of machinery essential to the manufacturing process and the production or processing of the final product, so they qualified for credit.

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Issues: Whether the items such as grinding wheel, electric motor, gear pump, HRC fuse, static convertor, heat exchanger and cable qualified as capital goods for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: Prior to 16-3-1995, Rule 57Q allowed credit only on capital goods falling within the relevant explanations, namely machines, machinery, equipment and parts thereof used for producing or processing dutiable final products or for bringing about a change in any substance used in manufacture. On the facts, the items in question were found to be machines or parts of machinery, and by their location and use in the plant they were essential to the manufacturing process and to the production or processing of the final product.

Conclusion: The items were held to be capital goods eligible for Modvat credit and the Revenue's appeal failed.

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