Modvat credit on manufacturing equipment allowed for process-control items, but mercury in steel dial thermometer was excluded.

Modvat credit under Rule 57Q was examined item-wise for equipment used in the manufacturing process. Measuring instruments, inverter and spares, differential pressure transmitters, programmable logic controller, regulating devices, system cable, boiler furnace sheet and fan coil unit were treated as capital goods because they were used for monitoring, controlling, maintaining process conditions, and facilitating efficient manufacture; credit was admissible on those items. Mercury in steel dial thermometer was distinguished from the other instruments and, following the earlier view, was treated as not qualifying as capital goods; credit was inadmissible on that item.

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Issues: Whether Modvat credit under Rule 57Q was admissible on measuring instruments, inverter and spares, differential pressure transmitters, programmable logic controller, regulating devices, system cable, boiler furnace sheet and fan coil unit, and whether mercury in steel dial thermometer was also eligible.

Analysis: The disputed items were examined item-wise on the basis of their use in the manufacturing process. Measuring instruments, controlling devices, programmable logic controller, regulating devices and items integrally connected with production were treated as capital goods because they were used for monitoring, controlling, maintaining process conditions, and carrying out manufacture efficiently. The mercury in steel dial thermometer was distinguished from the other instruments and followed the earlier view that it was not capital goods eligible for credit.

Conclusion: Modvat credit was admissible on all the disputed items except mercury in steel dial thermometer, which was held ineligible.

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