Modvat credit on calibration oil turns on whether post-manufacture testing forms part of manufacture.

Calibration oil used to test nozzle holders after manufacture was disputed as an eligible Modvat input. The assessee argued that calibration testing formed an integral part of manufacture, so credit should not be denied on the oil. The department maintained that the oil was used only for a post-manufacture functional test and therefore did not qualify as an input. The extracted text records these competing positions but contains no final adjudication on eligibility for credit.

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Issues: Whether calibration oil used for testing the functioning of nozzle holders after manufacture could be treated as an eligible input for Modvat credit.

Analysis: The order records the assessee's contention that calibration testing was an integral part of manufacture and that denial of credit on calibration oil was incorrect. It also records the departmental stand adopting the reasoning of the lower authorities that the oil was used only for a functional test after the nozzle had already been manufactured, and therefore could not qualify as an input.

Outcome: No final adjudication on the issue is contained in the extracted text.

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