Broad interpretation of Modvat capital goods credit under Rule 57Q limits need for separate reference

Modvat credit under Rule 57Q was considered on the basis of a broad interpretation of "capital goods", including goods not specifically named in the rule if used in manufacture. Earlier Supreme Court authority favouring liberal construction of exemption and credit provisions was applied, and the items in question were not shown to lack actual use in the manufacturing process. On that reasoning, the Tribunal's allowance of credit on the covered items was treated as sufficient, and no separate reference on the proposed question was warranted; the reference petition was rejected.

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Issues: Whether a reference should be made on the question whether Modvat credit under Rule 57Q could extend to goods not specifically named in the rule, where the goods were used in manufacture as capital goods.

Analysis: The broad definition of capital goods under Rule 57Q was applied in the light of the earlier Supreme Court decisions on the liberal interpretation of exemption and credit provisions. The items for which credit was claimed were not shown to lack actual use in the manufacturing process, and the Tribunal had already allowed credit on the items covered by that reasoning. In these circumstances, no separate reference on the proposed question was warranted.

Conclusion: The proposed question did not require reference, and the reference petition was rejected.

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