Capital goods eligibility for Modvat credit turned on functional use in manufacturing and processing activities.

Disputed items were treated as capital goods eligible for Modvat credit under Rule 57Q because the Commissioner (Appeals) had given item-wise findings on their functional use in manufacturing, production and processing activities, and the Revenue did not dispute those use-based findings. On that record, the items fell within the scope of capital goods and the Modvat credit was held admissible.

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Issues: Whether the disputed items were eligible as capital goods for Modvat credit under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The Commissioner (Appeals) had recorded item-wise findings explaining how each article was used in the manufacture of the final product or in production and processing activities. The Revenue did not challenge those findings on the functional use of the individual items. On the record, the items were treated as falling within the scope of capital goods under Rule 57Q.

Conclusion: The Modvat credit was held admissible and the Revenue's appeal failed.

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