MODVAT credit for oxygen and acetylene gases used in casting manufacture was recognised for process-related use.

Oxygen and acetylene gases used for cutting runners and risers and for welding in casting manufacture were treated as eligible MODVAT inputs where they were used in or in relation to manufacture, even though they did not physically remain in the finished goods. The note relies on earlier tribunal views, a similar decision of another Bench, and a contemporaneous trade notice supporting credit for such gases in castings. The operative position stated is that MODVAT credit was available for these gases when their use was integrally connected with the manufacturing process.

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Issues: Whether oxygen and acetylene gases used for cutting runners and risers and for welding purposes were eligible for MODVAT credit as inputs used in or in relation to the manufacture of the final product.

Analysis: The inputs were found to qualify where they were used in or in relation to the manufacture of the end-product, even if they did not physically remain in the finished goods. The Bench relied on its earlier view and a similar decision of another Bench, and also noted the contemporaneous trade notice permitting credit on oxygen and acetylene gases used for cutting and welding in castings.

Conclusion: The appellants were held entitled to MODVAT credit in respect of the gases used for manufacture of the final product.

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