Modvat credit for forklift trucks allowed where goods-handling equipment was integral to manufacture and notice omitted Rule 57Q.

Forklift trucks used for movement of goods within and outside the factory were treated as eligible inputs for Modvat credit under Rule 57A because goods-handling equipment integrally connected with manufacture can fall within the input definition. The Tribunal also held that Rule 57Q could not be relied on when the show cause notice did not invoke it, and the department could not cure that defect with new material at the appellate stage. On that reasoning, the departmental objection failed and credit was allowed to the assessee.

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Issues: Whether forklift truck was eligible for Modvat credit as an input under Rule 57A of the Central Excise Rules and whether Rule 57Q had any application.

Analysis: The Tribunal followed the decision in the assessee's own case and accepted that the forklift truck was used for movement of goods within the factory and outside, and was therefore an input for the purpose of Rule 57A. It distinguished material handling systems of a different nature and applied the principle that goods handling integrally connected with the manufacturing process can fall within the scope of input. The Tribunal also held that reference to Rule 57Q was unnecessary because the show cause notice did not invoke that rule, and the department could not support its objection with any evidence at the appellate stage. The absence of a proper factual foundation in the show cause notice was held fatal to the department's case.

Conclusion: Forklift truck was held to be eligible input for Modvat credit under Rule 57A, and the departmental objection based on Rule 57Q failed. The appeal was decided in favour of the assessee.

Ratio Decidendi: Where goods handling equipment is used within the factory in a manner integrally connected with manufacture, and the show cause notice does not invoke the exclusionary provision relied upon by the department, Modvat credit cannot be denied under Rule 57A.

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