EOT crane used in manufacture qualifies as capital goods, making Modvat credit admissible under a use-based test.

An EOT crane used to handle raw material, carry scrap to the furnace and move molten metal was treated as capital goods under Rule 57Q because the controlling test is the use to which the item is put in manufacture. Applying the liberal language of the rule, machinery, plant, tools or appliances used for producing or processing goods, or for bringing about change in a substance for manufacture, qualify for Modvat credit. On the facts found, the crane was essential to the manufacturing process, so Modvat credit was admissible and the revenue's appeal failed.

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Issues: Whether an EOT crane used for handling raw material and molten metal was entitled to Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The crane was found on facts to be essential for handling raw material, carrying scrap to the furnace, and handling molten metal from the furnace. The governing principle applied was that, under the liberal language of Rule 57Q, machinery, plant, tools or appliances used for producing or processing goods, or for bringing about change in any substance for manufacture of the final product, qualify as capital goods. The relevant test is the use to which the item is put, and the factual finding of essential use for manufacture was not displaced.

Conclusion: The EOT crane qualified as capital goods and Modvat credit was admissible; the revenue's appeal failed.

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