Capital goods eligibility for exhaust fans upheld where Rule 57Q exclusions did not apply and Modvat credit could not be denied.

Exhaust fans received and used in the factory were treated as capital goods for Modvat credit under Rule 57Q(1) because they satisfied the principal requirement of the rule and were not included in the exclusion list under Explanation 1, Clause (aa). On that basis, denial of credit was unsustainable and the fans qualified for Modvat credit.

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Issues: Whether exhaust fans falling under Chapter heading 84.14 were eligible as capital goods for Modvat credit under Rule 57Q(1), and whether they were excluded by Explanation 1, Clause (aa).

Analysis: The goods were admittedly received and used in the factory. They did not appear in the list of excluded capital goods under Clause (aa) of Explanation 1 to Rule 57Q(1). Since the principal requirement of the rule was satisfied and the goods were not specifically excluded, the credit could not be disallowed on the reasoning adopted by the lower authorities.

Conclusion: The exhaust fans qualified as capital goods under Rule 57Q(1), and the denial of Modvat credit was unsustainable.

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