Modvat credit on machinery parts used in manufacture allowed where items were not self-contained tools or appliances.

PE steel tubes and stainless steel tubes cold drawn, used as drill bars for tapping molten metal from a blast furnace, qualified as Modvat inputs because they were consumed in the process and had to be replaced for each use. The decisive test was whether the article was a self-contained complete tool or only a part used in manufacture; these tubes were treated as machinery parts rather than standalone tools, so the exclusion clause did not apply. Modvat credit and allied relief were therefore admissible.

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Issues: Whether PE steel tubes and SS tubes cold drawn, used as drill bars for tapping molten metal from a blast furnace, were admissible inputs for Modvat credit under Rule 57A and allied relief under Rule 57H, or were excluded as tools.

Analysis: The goods were used with the drill machine for tapping operations and were consumed in the process, requiring replacement for each use. The decisive test applied was whether the article was a self-contained complete tool or merely a part used in the manufacturing process. Items that are not independent, complete units capable of performing a function on their own do not fall within the exclusion clause. The reasoning also treated the impugned tubes as comparable to parts of machinery rather than standalone tools, and relied on the principle that parts used in relation to manufacture remain eligible inputs where the exclusion clause is not attracted.

Conclusion: The tubes were held to be admissible Modvat inputs and not excluded as tools.

Ratio Decidendi: Articles that are merely parts of machinery and are used in or in relation to manufacture, but are not self-contained complete tools or appliances, are not hit by the exclusion clause to Rule 57A and qualify for Modvat credit.

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