Embedded furnace components can qualify as manufacture inputs where they are indispensable to producing the final product.

Graphite blocks embedded in a furnace and used to conduct electricity between bus bars and graphite electrodes were treated as integral to the manufacturing process, not as independent apparatus. Because the electrodes could not be manufactured without the furnace and the furnace could not function without the blocks, they qualified as inputs used in or in relation to manufacture and fell outside the notification's exclusion for machines, plant, equipment or apparatus, which did not extend to their parts. The exemption under Notification No. 217/86 was therefore available, and the appellate authority's grant of relief was sustained.

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Issues: Whether graphite blocks used in the furnace for manufacture of graphite electrodes were inputs used in or in relation to manufacture and therefore eligible for exemption under Notification No. 217/86.

Analysis: The graphite electrodes could not be manufactured without the furnace, and the furnace could not function without the graphite blocks used to conduct electricity. The blocks were embedded in the furnace and served as electrical conductors between the bus bars and the electrodes. On that basis, they were treated as integral to the manufacturing process and as parts of the furnace rather than as independent apparatus. The exclusion in the notification covered machines, machinery, plant, equipment, apparatus, tools or appliances used for processing or producing goods, but did not extend to parts thereof.

Conclusion: The graphite blocks were inputs used in or in relation to manufacture and were not excluded as apparatus, so the exemption was available to the assessee.

Final Conclusion: The appeal failed and the exemption granted by the appellate authority was sustained.

Ratio Decidendi: Where a component is an embedded part of manufacturing machinery and is indispensable to the manufacture of the final product, it may qualify as an input used in or in relation to manufacture, and the exclusion for machinery does not automatically extend to its parts unless expressly stated.

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