Magnesite bricks as furnace lining qualified as inputs where their use was integral to the manufacturing process.

Magnesite bricks used as furnace lining in the manufacture of ferro alloys were treated as eligible inputs under Rule 57A(1) because their use was integral to the melting process and connected with manufacture. The exclusion for items used in or in relation to the construction of a furnace was held inapplicable, as the bricks functioned as part of the machinery/furnace arrangement rather than as construction materials in the disqualifying sense. The result was that the bricks qualified for input treatment and the exclusion clause did not apply.

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Issues: Whether magnesite bricks used for lining a furnace used in the manufacture of the final product were eligible as inputs under Rule 57A(1), and whether they were excluded as items used in or in relation to the construction of a furnace.

Analysis: The bricks were used as lining of the furnace, which was essential for melting metal in the course of manufacture of ferro alloys. The exclusion under the explanation to Rule 57A(1) did not apply, because the cited Larger Bench decision held that parts of machinery do not fall within the exclusion clause. The use of the bricks was therefore connected with the manufacturing process and not with construction of the furnace in the disqualifying sense.

Conclusion: The magnesite bricks qualified as inputs and were not hit by the exclusion clause under Rule 57A(1); the appeal was rejected.

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