Wide meaning of 'used in relation to manufacture' supports Modvat credit for titanium anodes in electrolysis process

Titanium anodes used in electrolysis for manufacture of caustic soda or caustic potash were treated as eligible inputs for Modvat credit because the phrase used in or in relation to the manufacture was given a wide construction. Articles that participate in and are integrally connected with the manufacturing process may qualify as inputs even if they are not raw materials in the strict sense. Applying that principle under Rule 57A, titanium anodes were not excluded from Modvat eligibility, and the assessee was entitled to the credit benefit.

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Issues: Whether titanium anodes used in the electrolysis process for manufacture of caustic soda/caustic potash are inputs eligible for Modvat credit under the relevant rules.

Analysis: The Tribunal followed earlier decisions holding that the expression used in or in relation to the manufacture has a wide amplitude and that articles participating in the manufacturing process may qualify as inputs, even if they are not raw materials in the strict sense. Relying on prior Tribunal rulings and the wider construction adopted for Rule 57A, titanium anodes used in the process were treated as covered by the provision and not excluded from Modvat eligibility.

Conclusion: Titanium anodes are eligible inputs for Modvat credit, and the assessee is entitled to the benefit.

Ratio Decidendi: For Modvat purposes, the expression used in or in relation to the manufacture is to be given a wide meaning, so articles integrally connected with the manufacturing process qualify as inputs unless specifically excluded.

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