Rule 57Q capital goods credit must be re-examined under the amended definition and the Jawahar Mills factory-use test.

Rule 57Q credit on refrigeration compressor and allied equipment had to be reconsidered because the amended definition of capital goods effective from 16-3-1995 was not properly addressed. The governing test, as explained in Jawahar Mills, treated use in the factory as the relevant criterion rather than a direct nexus with manufacture. As the Commissioner (Appeals) had not clearly examined the amendment while allowing credit, a de novo review was required. The matter was therefore remanded for fresh decision in accordance with law.

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Issues: Whether credit under Rule 57Q was admissible on refrigeration compressor and allied equipment, and whether the matter required fresh consideration in light of the amendment effective from 16-3-1995 and the decision in Jawahar Mills.

Analysis: The claim for credit was examined in the setting of the liberal scope of the definition of capital goods under Rule 57Q, as explained by the Supreme Court, where use in the factory and not a direct nexus with manufacture was treated as the governing consideration. The record, however, showed that the Commissioner (Appeals) had not clearly dealt with the amendment made effective from 16-3-95 to the definition of capital goods while allowing the credit. In these circumstances, a de novo examination was considered necessary with reference to the amended provision and the controlling precedent.

Conclusion: The matter was remanded to the Commissioner (Appeals) for fresh decision in accordance with law.

Ratio Decidendi: Where the applicability of the amended definition of capital goods has not been properly considered, the credit issue must be re-examined afresh in light of the statutory amendment and the liberal test governing use in the factory.

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