Modvat credit for furnace consumables upheld where materials were essential to steel manufacture and furnace protection.

Ramming Mass, fibre glass and filter mesh used in the electric arc furnace process were treated as inputs used in or in relation to manufacture for Modvat purposes. The materials lined the furnace, neutralised acidic vapours during steel melting, and were found essential to the manufacturing process as well as necessary to prevent damage to the furnace. Applying its earlier view on the same manufacturing facts, the Supreme Court held that such consumables qualified as eligible inputs. The assessees were therefore entitled to Modvat credit on these items.

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Issues: Whether Ramming Mass, Fibre glass and filter mesh used in the manufacture of steel products were eligible for Modvat credit as inputs used in or in relation to manufacture.

Analysis: The materials were used in the electric arc furnace process to line the furnace and neutralise acidic vapours generated during melting of steel. Their use was found to be essential for the manufacturing process and necessary to prevent damage to the furnace. On the same manufacturing facts, the Court applied its earlier view that such consumables are used in relation to the manufacture of the final product.

Conclusion: The assessees were entitled to Modvat credit on Ramming Mass, Fibre glass and filter mesh.

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