Capital goods under Modvat credit rules include UPS and vibration-monitoring equipment where larger bench interpretation governs.

Goods used in connection with a UPS system and for measuring and monitoring machine vibration were treated as capital goods under Rule 57Q of the Central Excise Rules, 1944. The Larger Bench interpretation of the Explanation to Rule 57Q(1) brought such items within the capital goods definition, and the Revenue's earlier authorities were not followed after that ruling. Modvat credit was therefore available on the disputed goods, and the Revenue's challenge failed.

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Issues: Whether the goods in question were capital goods eligible for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The use of the disputed items was accepted as being connected with the UPS system and with measuring and monitoring machine vibration, and these uses were not disputed in the appeal. In light of the Larger Bench interpretation of the Explanation to Rule 57Q(1), such goods fell within the scope of capital goods. The earlier decisions relied upon by the Revenue were treated as not governing the issue after the Larger Bench ruling.

Conclusion: The goods were held to be capital goods eligible for Modvat credit under Rule 57Q, and the Revenue's appeal failed.

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