Modvat credit for duty-paid components of earlier-installed machinery remains admissible when the items themselves are dutiable after the cut-off date.

Modvat credit under Rule 57Q was considered admissible for components, spare parts and accessories used in machinery installed before 1-3-1994, where those items themselves had suffered duty on or after that date. The Tribunal treated the issue as settled by earlier decisions and found no basis to deny credit merely because the capital goods were installed before the cut-off date. The decisive consideration was the duty status of the components, spare parts and accessories, not the installation date of the machinery in which they were used. On that reasoning, the Revenue's objection was rejected and credit was allowed.

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Issues: Whether Modvat credit was admissible under Rule 57Q of the Central Excise Rules, 1944 on components, spare parts and accessories used in machinery installed prior to 1-3-1994, where duty had been paid on or after 1-3-1994.

Analysis: The Tribunal noted that the point was no longer res integra and had already been decided in earlier appeals. It held that the relevant consideration was whether the components, spare parts and accessories themselves had suffered duty on or after 1-3-1994. Since the Revenue did not distinguish the earlier decisions and did not raise a separate challenge on the classification of the items as components, spare parts or accessories, there was no basis to deny credit merely because the capital goods had been installed before the cut-off date.

Conclusion: Modvat credit was admissible, and the Revenue's challenge failed.

Ratio Decidendi: Where components, spare parts and accessories of capital goods have suffered duty on or after the relevant cut-off date, Modvat credit cannot be denied merely because the capital goods in which they are used were installed earlier.

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