MODVAT credit on BOPP films used in lamination allowed as inputs consumed in manufacture, not apparatus or appliances.

BOPP films used in the manufacture of decorative laminate sheets qualified as inputs for MODVAT credit under Rule 57A because they were used in the lamination process, were partly consumed, and lost their identity after use. The exclusion for machinery, equipment, apparatus and appliances did not apply, as the films did not perform any such function. The material also need not form part of the finished product to qualify, because MODVAT extends to materials used in or in relation to manufacture. Accordingly, the films were eligible inputs and not excluded by the explanation to Rule 57A.

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Issues: Whether BOPP films used in the manufacture of decorative laminate sheets were eligible inputs for MODVAT credit under Rule 57A, or whether they stood excluded as apparatus or appliances.

Analysis: Rule 57A permits credit on inputs used in or in relation to the manufacture of the final product, subject only to the exclusion of machinery, equipment, apparatus, appliances and similar items. The films were used in the lamination process, were partly consumed therein, and lost their identity after use. They did not function as machinery, equipment, apparatus or appliances, nor was it necessary that the input should form part of the finished product. The scheme of MODVAT is wider than the earlier proforma credit arrangement and extends to materials used in the manufacturing process, including items that are consumed or used in relation to manufacture.

Conclusion: The BOPP films were eligible inputs for MODVAT credit and were not excluded by the explanation to Rule 57A.

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