Capital goods eligibility for computers used in design and programme development under Modvat credit upheld

Personal computers used for designing machines and components and for developing processing programmes were treated as capital goods under Rule 57Q because an earlier Tribunal ruling had already recognised computers used for sketching, drawing and design of the final product as eligible for Modvat credit. Applying that ratio, the same eligibility was extended to computers used in the manufacturing process, so Modvat credit was allowed and the Revenue's challenge failed.

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Issues: Whether personal computers used for designing machines and components and for developing programmes for processing the components qualify as capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The issue was treated as covered by an earlier Tribunal decision holding that computers used for sketching, drawing and design of the final product are capital goods for the purpose of Rule 57Q and therefore qualify for Modvat credit. Applying that ratio, the same treatment was extended to computers used in the present manufacturing process.

Conclusion: The computers were held to be capital goods eligible for Modvat credit, and the Revenue's appeal failed.

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