Functional use test allowed capital goods credit for equipment, components and transmission items connected with manufacturing operations.

Capital goods credit under Rule 57Q was held admissible on the disputed items because each was functionally connected to manufacture. The electrostatic precipitator qualified as pollution control equipment linked to the coal-fired boiler used for steam generation. Conveyor belt, pay loader and chain hoist equipment were treated as material handling equipment for moving coal and paper. Electric wires and cables were accepted as eligible factory transmission items. The auto manual station was treated as an instrument controlling boiler water level, while pins and spare pins were regarded as spare parts of the pay loader. The booster and CPU 100 module were accepted as components of pollution control and soot blower equipment. Credit was admissible on all items.

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Issues: Whether capital goods credit under Rule 57Q was admissible on the eight disputed items, namely electrostatic precipitator, conveyor belt and pay loader, chain hoist equipments and chains, electric wires and cables, auto manual station, pin and spare of pins, booster, and CPU 100 module.

Analysis: The items were examined by their functional use in the manufacturing process. The electrostatic precipitator was treated as pollution control equipment connected with the coal-fired boiler used for steam generation essential to manufacture. The conveyor belt, pay loader, and chain hoist equipments were regarded as material handling equipment used for movement and feeding of coal and shifting of paper. Electric wires and cables were accepted as eligible items following the larger bench view that electrical transmission within the factory falls within capital goods. The auto manual station was found to be an instrument controlling boiler water level and therefore a capital goods item. The pin and spare pins were treated as spare parts of the pay loader. The booster was regarded as a component of pollution control equipment. The CPU 100 module was treated as a component of a soot blower, which is an accessory of the boiler used for cleaning and efficient operation.

Conclusion: Credit was admissible on all the disputed items under Rule 57Q.

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