Capital goods credit for processing equipment upheld where items were used in manufacture of organic chemicals.

Modvat credit as capital goods was held admissible for centrifugal pumps, globe valves, multicribe recorders and oil hoses/heating equipment used in processing organic chemicals. The items were treated as machinery, equipment or parts covered by the capital goods definition under Section 57Q of the Central Excise Rules because they were used in producing or processing the final product, or in bringing about a change in substance for manufacture. On that basis, the disputed goods qualified for credit and the revenue's appeal was rejected.

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Issues: Whether Modvat credit as capital goods was admissible on centrifugal pump, globe valves, multicribe recorder and oil hoses/heating equipment used in the manufacturing process.

Analysis: The goods were found to be used in the processing of the final product by the assessee manufacturing organic chemicals. The definition of capital goods under Section 57Q of the Central Excise Rules includes machine, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing, or for bringing about any change in substance for manufacture of the final product, and also covers components, spare parts and accessories of such machinery. On that basis, the items in question were treated as machinery or parts used in processing the final product.

Conclusion: The benefit of Modvat credit as capital goods was admissible on the disputed items and the appeal filed by the revenue was rejected.

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