Capital goods treatment for slag pots upheld where equipment actively supports recycling in the manufacturing process.

Slag pots used to collect red-hot liquid wastage metal from an electric arc furnace and enable its recycling in the furnace were treated as prima facie capital goods under Rule 57Q. The Tribunal applied the principle that equipment performing an active and indispensable role in the manufacturing process may qualify for Modvat credit, drawing support from cases on dust-collection bags. On that basis, the assessee was entitled to Modvat credit at the stay stage.

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Issues: Whether slag pots used for collecting liquid wastage metal and enabling its recycling in the furnace are prima facie capital goods entitled to Modvat credit under Rule 57Q of the Central Excise Rules.

Analysis: The Tribunal noted that the slag pots collect red hot liquid wastage metal from the electric arc furnace, which solidifies and is then recycled by the assessee in the furnace. Applying the same approach adopted in cases involving dust-collection bags, the Tribunal found that such equipment performs an active and indispensable role in the manufacturing process and is therefore capable of being treated as capital goods for the purpose of Modvat credit.

Conclusion: The slag pots were held to be prima facie capital goods under Rule 57Q and the assessee was entitled to the benefit of Modvat credit at the stay stage.

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