Input credit on resins used for plant fabrication upheld under the expanded capital goods explanation.

Credit was treated as admissible on polyester resins used to fabricate tubes, pipes and tanks, because those items were required for the plant used in manufacturing the final products. Explanation 2 inserted by Notification No. 6/2001 was read as permitting credit on goods used in the manufacture of capital goods that are further used in the manufacturer's factory. On that construction, the appellate order granting credit was found to be legally correct, and the Revenue's objection to such credit failed.

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Issues: Whether credit was admissible on polyester resins used for fabrication of tubes, pipes and tanks as inputs for manufacture of final products under the capital goods definition and the subsequently inserted Explanation 2.

Analysis: The item was used in fabricating tubes, pipes and tanks, which were necessary for the plant used to manufacture the final products. Explanation 2 inserted by Notification No. 6/2001 permitted credit on goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. On this construction, the provision was intended to allow credit and there was no legal infirmity in the appellate order allowing such credit.

Conclusion: Credit was admissible and the Revenue's challenge failed.

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