Manufacturing inputs exclusion: diaphragms and air bags used in tyre moulding were treated as equipment, not eligible MODVAT inputs.

Diaphragms and air bags used with moulds for shaping tyres at the green stage were treated as part of one apparatus used in manufacture, not as eligible consumable inputs. Because they functioned as equipment, and the relevant MODVAT provisions and notification excluded equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about a change in a substance in relation to manufacture, they fell outside the benefit claimed. The earlier order cited did not address the specific exclusion clause relied on here.

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Issues: Whether diaphragms and air bags used in moulds for shaping tyres were eligible as inputs for MODVAT credit or exemption, or were excluded as equipment, apparatus, tools or appliances used in or in relation to manufacture.

Analysis: The items were used together with the moulds to give shape to tyres at the green stage and were captively consumed, though reusable for a limited number of times before being discarded. On their function, they formed part of one apparatus for producing the finished product and therefore answered the description of equipment rather than consumable inputs. The exclusionary language in the relevant MODVAT provisions and the notification covered equipment, apparatus, tools or appliances used for producing or processing goods or for bringing about a change in any substance in relation to manufacture. The cited earlier order did not decide the effect of the specific exclusion clause applicable here.

Conclusion: The items were not eligible for MODVAT credit or exemption and were excluded from the benefit of the relevant provisions.

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