Modvat credit on valves used for gas-cylinders packing was admissible because Rule 57Q was not limited to direct manufacture.

Modvat credit was held admissible on valves used with cylinders for packing chlorine gas under Rule 57Q. The rule permitted credit on specified goods used in the manufacturer's factory, and its scope was not limited to items directly used in producing the final product. Because the valves were necessary for the cylinders to function as packing equipment for chlorine gas, they qualified as eligible inputs/equipment for credit. The departmental challenge accordingly failed.

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Issues: Whether Modvat credit was admissible on valves used in cylinders for packing chlorine gas under Rule 57Q.

Analysis: Rule 57Q allowed credit on specified goods if used in the factory of the manufacturer of final products, and its scope was not confined to goods directly used in the manufacture of the final product. The valves were necessary for using the cylinders for packing chlorine gas, and without them the cylinders could not serve that function.

Conclusion: Credit on the valves was admissible under Rule 57Q and the departmental appeal failed.

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