Capital goods treatment for air conditioning plant parts allowed Modvat credit where temperature control was essential to manufacture.

Copper cable used in a centralised air conditioning plant was treated as capital goods eligible for Modvat credit under Rule 57Q because the plant was integral to maintaining the temperature and atmosphere required for watch manufacturing. The Tribunal applied earlier decisions recognising that an air conditioning plant, and its parts, qualify as capital goods when they are essential to the manufacturing process. On that basis, the Revenue challenge failed and the credit was allowed.

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Issues: Whether copper cable used in the centralised air conditioning plant was eligible as capital goods for Modvat credit under Rule 57Q.

Analysis: The Tribunal noted that earlier decisions had already held that an air conditioning plant, or its parts, used to maintain the required temperature and atmosphere for manufacture of watches was essential to the manufacturing process and therefore qualified as capital goods. The item in question was copper cable used in that air conditioning plant, and the cited decisions were found to apply directly to the present facts.

Conclusion: The copper cable used in the air conditioning plant was held eligible for Modvat credit as capital goods. The Revenue appeal was rejected.

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