Input used in furnace lining qualifies for manufacture-linked exemption when applied in the production process.

Mortar used in lining furnaces for iron and steel manufacture was treated as a refractory input used in the manufacturing process and not required to form part of the finished product. Applying a broad construction of the phrase "in relation to the manufacture," the Tribunal accepted that inputs used in the process itself can qualify for exemption where the notification does not exclude them. On that basis, mortar used in furnace lining was held eligible for the benefit of Notification No. 217/86-C.E. and the claim to exemption succeeded.

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Issues: Whether mortar used in the lining of furnaces for manufacture of iron and steel products was eligible for exemption under Notification No. 217/86-C.E. as an input used in or in relation to the manufacture of the final product.

Analysis: Mortars were treated as refractory materials used as layers in the lining of the furnace and requiring frequent replacement. The Tribunal applied the broad construction of the expression "in relation to the manufacture" and accepted that inputs need not be directly incorporated into the final product if they are used in the manufacturing process. On that approach, mortar used in lining the furnace was considered an input connected with manufacture and covered by the exemption.

Conclusion: The mortar was held eligible for the benefit of Notification No. 217/86-C.E., and the issue was decided in favour of the assessee.

Final Conclusion: The appeals succeeded to the extent of the claim to exemption for mortar used in the manufacture of iron and steel products.

Ratio Decidendi: Goods used in the manufacturing process, though not directly forming part of the finished product, qualify where they are used in relation to manufacture and are not excluded by the relevant notification or rule.

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