Retrospective Modvat amendment removes capacity restriction for diesel generating sets under capital goods classification.

A clarificatory amendment to the Modvat capital goods notification was treated as retrospective, so diesel generating sets classifiable under Heading 8502.00 fell within the definition of capital goods. The earlier capacity restriction no longer applied under the amended provision, and Modvat credit became admissible on such generating sets. On that basis, the diesel generating set qualified for credit and the Revenue's appeal failed.

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Issues: Whether diesel generating sets falling under Heading 8502.00 were eligible for Modvat credit as capital goods after the amendment to the relevant notification.

Analysis: The amended notification included generating sets within the definition of capital goods, and the amendment was treated as clarificatory in nature with retrospective effect. Once the item fell under Heading 8502.00, the capacity criterion ceased to operate under the amended provision, and Modvat credit became admissible on such capital goods.

Conclusion: The diesel generating set was eligible for Modvat credit, and the Revenue's appeal failed.

Ratio Decidendi: A clarificatory amendment to the Modvat capital goods provision applies retrospectively and entitles goods falling under Heading 8502.00 to credit without the earlier capacity restriction.

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