Input vat on capital goods - set off

Client is a builder in Maharashtra and is purchasing Capital Goods such as excavator, cranes, etc. from a dealer within Maharashtra.

I want to know whether Vat paid on purchase of capital goods ( @ 12.5%) by a builder can be set-off against his VAT liability of 1% at the time of sale of Flats? 

Also what would be the situation if the capital goods are directly purchased from the manufacturer ie. excise duty is levied??

How can the excise duty / input VAT amount be appropriately utilised?