Capital goods eligibility under Modvat credit extends to capacitors and reactors used in the factory, without direct manufacture use

Capacitors and reactors were treated as eligible capital goods for Modvat credit under Rule 57Q of the Central Excise Rules, applying the test whether the goods were used in the factory as capital goods rather than requiring direct use in the manufacture of finished products. The analysis relied on the Tribunal's Larger Bench decision and the relevant budget circular. On that basis, Modvat credit was allowed for the disputed items.

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Issues: Whether capacitors and reactors are eligible capital goods for availment of Modvat credit under Rule 57Q of the Central Excise Rules.

Analysis: The item in dispute was considered in the light of the Tribunal's Larger Bench decision and the relevant budget circular. The governing test applied was whether the goods qualified as capital goods used in the factory so as to attract credit under Rule 57Q, without requiring proof that they were directly used in the manufacture of finished goods.

Conclusion: Capacitors and reactors were held to be eligible capital goods under Rule 57Q and Modvat credit was allowed.

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