Modvat credit on gas loss during manufacture was upheld where evaporated inputs were still treated as used in production.

Modvat credit on gases lost during manufacture was held not disallowable where the loss occurred in the manufacturing process and was attributable to the nature of the inputs used; evaporated gas could not be treated as unused in or in relation to manufacture. The Revenue's relied-on precedent was found inapplicable on its facts, and the prior Tribunal ruling in favour of the assessee had not been stayed, so credit was allowed.

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Issues: Whether Modvat credit was to be disallowed in respect of gases lost during the course of manufacture.

Analysis: The gas loss occurred during the manufacturing process and was attributable to the nature of the inputs used. A portion of the gas that evaporated in the course of manufacture could not be treated as if it had not been used in or in relation to the manufacture of the final products. The earlier decision relied upon by the Revenue was found inapplicable on its facts, and the prior Tribunal decision in favour of the assessee had not been stayed.

Conclusion: The credit was not liable to be disallowed and the issue was decided in favour of the assessee.

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