Modvat credit on capital goods is confined to the factory where they are installed and used.

Rule 57Q Modvat credit on capital goods was construed as available only when the goods are installed and used in the same factory where the final product is manufactured. Although the equipment qualified as capital goods, credit was denied because it was received by one unit and used in another factory of the same manufacturer. The expression "in the factory of the manufacturer" was read as referring to that specific registered factory, not to any other unit belonging to the same assessee, and the separate registration of the units supported their distinct excise identities.

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Issues: Whether Modvat credit under Rule 57Q of the Central Excise Rules, 1944 was admissible on capital goods received by one factory but installed and used in another factory of the same manufacturer.

Analysis: Rule 57Q was treated as requiring two conditions for credit on capital goods: the goods must qualify as capital goods, and they must be used in the manufacture of the final product in the factory where that final product emerges. Although the machine qualified as capital goods, the rule was read to require installation and use in the very factory of the manufacturer where the final product is produced. The expression "in the factory of the manufacturer" was construed as referring to that specific factory, and not to any other unit belonging to the same manufacturer. The separate registration of the two units supported the view that they had distinct excise identities.

Conclusion: Modvat credit was not admissible to the receiving factory when the capital goods were installed and used in another factory; the appeal failed.

Ratio Decidendi: Credit on capital goods under Rule 57Q is available only when the capital goods are installed and used in the same factory where the final product is manufactured.

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