Modvat credit for testing equipment upheld where spectrophotometer and Teflon spacer supported essential manufacturing checks.

Spectrophotometer and Teflon spacer were treated as eligible capital goods for Modvat credit under Rule 57Q because items used for testing and measuring inputs, intermediate products and final products qualify where such use is essential to completion of the manufacturing process. The Tribunal also followed an earlier ruling that recognised spectrophotometer as a qualifying item, and viewed the later enlargement of the capital goods definition as consistent with that approach. Credit was therefore allowed and the Revenue's challenge failed.

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Issues: Whether spectrophotometer and Teflon spacer were eligible for Modvat credit as capital goods under Rule 57Q.

Analysis: The Tribunal noted that items used for testing and measuring inputs, intermediate products and final products are eligible as capital goods where such use is essential for completion of the manufacturing process. It also relied on an earlier decision holding spectrophotometer to be a qualifying item for Modvat credit. The later amendment enlarging the definition of capital goods was treated as consistent with that view.

Conclusion: Spectrophotometer and Teflon spacer were held eligible for Modvat credit under Rule 57Q, and the Revenue's challenge failed.

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