Modvat credit on machinery components was allowed under Rule 57Q despite earlier installation of the machinery.

Rule 57Q of the Central Excise Rules, 1944 was understood to extend Modvat credit to components, spare parts and accessories used in machinery for producing or processing goods. The Tribunal's earlier view was treated as controlling, and no distinction was accepted merely because the machinery had been installed before 1-3-1994. Credit remained available where duty on the components, spare parts or accessories was paid on or after that date, even if they were used in pre-existing machinery. The Revenue's contrary position was rejected, and the article confirms the eligibility of such items as capital goods for credit purposes under Rule 57Q.

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Issues: Whether Modvat credit was admissible on components, spare parts and accessories brought into the factory and used in machinery installed prior to 1-3-1994 under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The admissibility of credit on such components, spare parts and accessories had already been decided by the Tribunal in earlier matters, and the corresponding reference applications filed by the Revenue had been rejected. The Tribunal treated its earlier decisions as binding in similar cases and found that Rule 57Q covered components, spare parts and accessories used in machinery for producing or processing goods. The rule did not support a distinction that would deny credit merely because the machinery in which the parts were used had been installed before 1-3-1994, so long as duty had been paid on the parts on or after that date.

Conclusion: Modvat credit was admissible on the said components, spare parts and accessories, provided duty had been paid on them on or after 1-3-1994, and the Revenue appeals were rejected.

Ratio Decidendi: Components, spare parts and accessories used in machinery are eligible capital goods under Rule 57Q of the Central Excise Rules, 1944, and credit cannot be denied merely because the machinery was installed before 1-3-1994 if duty on the components was paid on or after that date.

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