Broad construction of capital goods credit under Rule 57Q allows transformer credit for manufacturing use.

A transformer was treated as capital goods eligible for credit under Rule 57Q because the expression was construed broadly to cover items used in producing or processing goods and instruments necessary for manufacturing activity, not only goods directly used in turning out the final product. Applying the Larger Bench ruling in Jawahar Mills, the Tribunal held that the transformer fell within that scope and credit was admissible. The discussion of Notifications No. 11/95-NT and 14/96 did not change the result for the relevant period, and the retrospectivity issue was treated as academic.

---

---

Issues: Whether a transformer is eligible for capital goods credit under Rule 57Q of the Central Excise Rules.

Analysis: The Tribunal applied the Larger Bench ruling in Jawahar Mills and held that the expression used in Rule 57Q is not confined to goods directly or actually used in turning out the final product. On that approach, the scope of capital goods includes items used in producing or processing goods and instruments necessary for carrying on the manufacturing activity. The discussion on Notifications No. 11/95-NT and 14/96 also showed that the later amendment did not alter the result for the relevant period, and the controversy on retrospectivity was treated as academic.

Conclusion: The transformer was held to be capital goods and credit was admissible; the appeal was rejected.

---