Modvat credit on tooling disc upheld where input use in capital goods manufacture brought Rule 57D into play.

Modvat credit was treated as admissible on a disc used in a Carbide Slot Cutter for making hosiery and knitting needles, because the disc functioned as a tool in the machine and the credit claim was supported by Rule 57D(2) as brought into force by Notification No. 17/95. That provision allowed credit for inputs used in the manufacture of capital goods as well, and the departmental objection under Rule 57A did not displace the application of Rules 57D and 57Q on the stated facts. The Revenue's challenge therefore failed.

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Issues: Whether Modvat credit was admissible on the disc for Carbide Slot Cutter used in the manufacture of hosiery and knitting needles.

Analysis: The disc was used in the machine as a tool for cutting slots in needles, and the Commissioner had allowed credit by applying Rule 57D(2) as brought into force by Notification No. 17/95. That provision permitted credit in respect of inputs used in the manufacture of capital goods as well. Since the departmental challenge under Rule 57A did not displace the applicability of Rules 57D and 57Q to the facts, no sustainable ground remained to deny the credit.

Conclusion: Modvat credit on the disc for Carbide Slot Cutter was admissible, and the Revenue's appeal failed.

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