Modvat credit on capital goods under Rule 57Q must be read independently of tariff classification definitions.

Rule 57Q on Modvat credit for capital goods had to be interpreted in its own context, and the wider definition of "machine, machinery, plant etc." in Note 5 of Section XVI of the Central Excise Tariff Act could not control that provision. The tariff note operated in the distinct sphere of classification and duty, while the dispute concerned eligibility for capital goods credit. The Revenue's reliance on a precedent dealing with inputs was held inapplicable, and the matter was treated as covered by the Larger Bench ruling in Jawahar Mills. Modvat credit on the capital goods was therefore admissible, with the Revenue's appeals dismissed and the assessees granted consequential relief.

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Issues: Whether Modvat credit on capital goods was admissible under Rule 57Q, and whether Note 5 of Section XVI of the Central Excise Tariff Act, 1985 could be applied to construe the expression "machine, machinery, plant etc." in that rule.

Analysis: The expression in Rule 57Q had to be construed in the context of Modvat credit on capital goods, not by importing the definition of "machine" from Note 5 of Section XVI of the Central Excise Tariff Act, 1985, which operates in the distinct sphere of tariff classification and rate of duty. The wider definition in the tariff schedule could not control the meaning of the expression in the Modvat provision. The decision relied upon by the Revenue was found inapplicable because it concerned inputs, whereas the present controversy related to capital goods. The matters were held to be covered by the Larger Bench ruling in Jawahar Mills.

Conclusion: Modvat credit on the capital goods was held admissible, the Revenue's appeals were dismissed, and the assessees' appeals were allowed with consequential relief.

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