Modvat credit on factory computers denied where they were used only for planning and scheduling, not for manufacture.

Computers used only for planning and scheduling production, without controlling machinery, altering the goods, or testing finished products, lacked the real nexus with manufacture required for Modvat credit under Rule 57Q. Their function was treated as office-related rather than as apparatus used in or in relation to production, and later specific inclusion or exclusion of computers was read as clarifying the legislative intent for the disputed period. Modvat credit was therefore not allowable.

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Issues: Whether computers used in factory premises for planning and scheduling production of excisable goods are eligible for Modvat credit as capital goods under Rule 57Q.

Analysis: Eligibility under Rule 57Q depended on whether the item had a real nexus with the manufacturing process and functioned as apparatus or tool used in production. The computer in question was used only for scheduling and planning production, without controlling machinery, bringing about any change in the goods, or testing the finished product. Such use was treated as office-related rather than manufacture-related. The later specific inclusion or exclusion of computers was viewed as clarifying the legislative intent for the disputed period.

Conclusion: The computers were not capital goods used in or in relation to manufacture and Modvat credit was not allowable.

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