Capital goods credit for yarn twisting machinery was upheld where the tariff deemed twisting to be manufacture.

Twisting single ply yarn into multi-fold yarn was treated as manufacture because the tariff's deeming provisions in Notes 2 to Chapters 51 and 55 expressly covered twisting and similar processing. On that basis, machinery used for the process qualified as capital goods, so credit on the two-for-one twister under the excise credit rule was admissible. The Revenue's authorities were distinguished as relating to the erstwhile tariff and not controlling where the present tariff contained an express deeming fiction.

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Issues: Whether capital goods credit was admissible on a two-for-one twister used for twisting single ply yarn into multiple yarn, and whether such twisting amounted to manufacture for the purpose of Rule 57Q(1).

Analysis: The process of converting single ply yarn into multi-fold yarn was treated as incidental or ancillary to the completion of the manufactured product. The deeming provisions in Note 2 to Chapter 51 and Note 2 to Chapter 55 of the Central Excise Tariff Act, 1985 recognized twisting and similar processing as manufacture. The authorities relied on by the Revenue were distinguished as arising under the erstwhile tariff, whereas the present tariff contained an express deeming fiction covering the process in question.

Conclusion: Capital goods credit on the two-for-one twister was admissible, and the Revenue's appeal failed.

Final Conclusion: The order granting credit on the TFO machine was sustained and the Revenue challenge was rejected.

Ratio Decidendi: Where the tariff expressly deems twisting or similar processing of yarn to be manufacture, machinery used for that process qualifies for capital goods credit under the applicable excise credit provision.

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