Tariff-based exclusion under Rule 57Q barred Modvat credit for heat tracers classified under Chapter Heading 85.16.

Heat tracers classifiable under Chapter Heading 85.16 were not eligible as capital goods for Modvat credit under Rule 57Q after the 1-3-1997 amendment, because the amended table expressly excluded goods under that heading. The earlier circular could not override or control the post-amendment rule and was not treated as clarificatory for the revised provision. On that basis, eligibility had to be tested against the amended classification-based exclusion, and credit was unavailable where the tariff heading was expressly barred.

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Issues: Whether heat tracers classifiable under Chapter Heading 85.16 qualified as capital goods for Modvat credit under Rule 57Q, and whether Circular No. 276/106/96/CX dated 21-11-1996 could support eligibility under the amended rule.

Analysis: The disputed credit related to a period in 1998, when Rule 57Q as amended with effect from 1-3-1997 governed entitlement. Under the applicable rule, goods falling under Chapter Heading 85.16 were specifically excluded from Sl. No. 3 of the Table to Rule 57Q(1), and therefore did not answer the description of capital goods for Modvat purposes. The circular relied upon by the appellant could not govern the post-amendment rule and was not accepted as clarificatory for the amended provision.

Conclusion: Heat tracers classifiable under Chapter Heading 85.16 were not eligible as capital goods under Rule 57Q, and the Modvat credit was rightly disallowed.

Ratio Decidendi: Where the applicable rule expressly excludes goods by tariff classification, Modvat credit cannot be claimed on the basis of a prior circular or on functional use alone.

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