Functional test for capital goods eligibility allowed Modvat credit on an air circuit breaker under the pre-amendment regime.

Modvat credit under Rule 57Q was admissible on an air circuit breaker treated as capital goods because it performed the function of capital goods under the pre-amendment excise definition. The earlier Tribunal view that functional use, rather than express naming, governed eligibility was applied, and the fact that the item was an independent electrical device did not by itself defeat credit. On that reasoning, the credit was allowed and the Revenue's objection was rejected.

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Issues: Whether Modvat credit under Rule 57Q was admissible on an air circuit breaker claimed as capital goods.

Analysis: The credit was denied by the original authority on the view that the air circuit breaker was an independent electrical device not directly involved in manufacture. The appellate authority relied on the Tribunal's earlier view that goods performing the function of capital goods would remain eligible even before the amendment to the definition of capital goods by Notification No. 11/95-C.Ex. The Revenue did not dispute the applicability of that ratio, and the same reasoning was applied to the facts of the case.

Conclusion: The Modvat credit on the air circuit breaker was held admissible to the respondents and the Revenue's challenge was rejected.

Final Conclusion: The order affirms the eligibility of the disputed item for Modvat credit as capital goods under the governing excise regime.

Ratio Decidendi: Where goods perform the function of capital goods, Modvat credit cannot be denied merely because they are not specifically named in the pre-amendment definition.

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