Capital goods credit for preparatory machines used in cotton yarn manufacture was upheld on unstayed precedent.

Capital goods credit was held admissible for preparatory machines used to manufacture carded or combed cotton (silver) captively consumed in producing cotton yarn, because earlier Tribunal rulings had already accepted such credit where the machines were received before 21.10.1994. Those rulings were noted as unstayed and therefore continued to operate as binding precedent for the issue. The Revenue's objection that credit was unavailable since silver was not then a specified final product under Rule 57Q was rejected, and the appeals were dismissed.

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Issues: Whether capital goods credit was admissible on preparatory machines used in the manufacture of carded/combed cotton (silver) captively consumed in the manufacture of cotton yarn, where such machines were received in the factory before silver was specified as a final product under Rule 57Q.

Analysis: The Tribunal noted that the issue had already been decided in earlier Tribunal decisions holding that credit on capital goods used for preparing silver in the course of manufacture of cotton yarn was admissible when the capital goods were received prior to 21.10.1994. It also noted that those decisions had not been stayed and therefore continued to operate as applicable precedent. In that view, the Revenue's contention that credit was unavailable because silver was not then a specified final product was not accepted.

Conclusion: Capital goods credit was held to be admissible, and the Revenue's appeals were dismissed.

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