Consumable input used in manufacture qualifies for Modvat credit when wholly consumed and incorporated into the finished product.

A consumable item used to open furnace tap holes by oxygen lancing, which came into direct contact with molten steel and was wholly consumed by melting, was treated as an input used in relation to manufacture under Rule 57A. Because the pipe contributed to removal of the molten metal and its material became part of the finished excisable product, it satisfied the input requirement for Modvat credit. The reasoning was supported by a Larger Bench decision cited in the analysis.

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Issues: Whether lancing pipe used for evacuating molten metal from the furnace is an input used in relation to manufacture and eligible for Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The lancing pipe was used to open the tap holes of the furnace by oxygen lancing and came into direct contact with molten steel. On account of the high temperature, the pipe was consumed by melting and its material became part of the molten metal removed from the furnace. Since the pipe was wholly consumed in the manufacturing process and contributed to the finished excisable product, it answered the description of an input used in relation to manufacture. The conclusion was supported by the Larger Bench decision relied upon in the order.

Conclusion: The lancing pipe was eligible for Modvat credit.

Ratio Decidendi: A consumable item that is wholly used up in the manufacturing process and becomes part of the finished product is an input used in relation to manufacture and is eligible for Modvat credit.

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