Capital goods credit under Rule 57Q: reference confined to the distribution transformer, with the unrelated panel board issue excluded.

The earlier capital goods credit ruling treated the manufacturing expression as not limited to ingredients directly used to produce the final product, giving rise to a question of law on whether a distribution transformer qualified as capital goods under the unamended Explanation to Rule 57Q. The reference was confined to the product actually in dispute, because the electronic control panel board was not part of the credit allowed in the impugned order. The reference application was therefore allowed with modification, and only the question relating to the distribution transformer was referred to the High Court.

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Issues: Whether the reference application should be allowed on the question whether a distribution transformer was capital goods under Rule 57Q during July-August 1994 and whether the question referred required modification.

Analysis: The earlier order granting capital goods credit had relied on the view that the expression used for manufacture was not confined to ingredients directly needed for turning out the final product. In that context, a question of law was held to arise on whether a distribution transformer fell within the definition of capital goods under the unamended Explanation to Rule 57Q. The reference was also required to be confined to the product actually involved, since the electronic control panel board was not part of the credit allowed in the order under reference.

Conclusion: The reference application was allowed with modification, and only the question relating to the distribution transformer was referred to the High Court.

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