Input tax credit on capital goods allowed where fabric bleaching qualified as processing under the TNVAT Act.

Input tax credit on capital goods used in bleaching of fabric could not be denied merely because the activity was said not to amount to manufacture. The processing of fabric fell within the statutory concept of processing under the TNVAT Act, 2006, and the Tribunal's view that the assessing authority lacked adequate material to reverse credit was upheld. On that basis, the claim for input tax credit was sustained and the reversal of credit was held unsustainable.

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Issues: Whether input tax credit on capital goods used in bleaching of fabric could be denied on the ground that the activity did not amount to manufacture, and whether the dealer's activity fell within the statutory concept of processing under the TNVAT Act, 2006.

Analysis: The respondent was engaged in bleaching of fabric, which was treated as a taxable activity under the TNVAT Act, 2006. The Tribunal had accepted the first appellate authority's view that the process involved processing of goods within the meaning of the statutory definition and had also found that the assessing authority's reasons for reversal of input tax credit were unsupported by adequate material. The revisional Court found no reason to interfere with that well-considered view and held that input tax credit on capital goods used for such processing could not be denied.

Conclusion: The claim for input tax credit on capital goods was rightly allowed and the reversal of credit was not sustainable.

Ratio Decidendi: Where capital goods are used in a process that falls within the statutory concept of processing, input tax credit cannot be denied merely by characterising the activity as outside manufacture.

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