Modvat credit on phosphoric acid allowed where the material formed part of the sugar manufacturing process and improved marketability.

Phosphoric acid added to cane juice in cases of phosphatic deficiency was treated as an input used in relation to the manufacture of sugar, because it formed part of the manufacturing process and helped obtain the clarity needed to produce marketable sugar. The fact that it was used only when natural cane juice lacked sufficient phosphatic content did not change its character as an input for Modvat purposes. The Board's clarification was not accepted, and the assessee's entitlement to Modvat credit on the material was maintained.

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Issues: Whether phosphoric acid added to cane juice in cases of phosphatic deficiency was an input used in or in relation to the manufacture of sugar and eligible for Modvat credit, or an apparatus.

Analysis: The phosphoric acid was found to be added only where the natural cane juice lacked sufficient phosphatic content, and its use was necessary to obtain the required clarity for production of quality sugar. The fact that it was not required in every case did not negate its character as an input for Modvat purposes. Material relied upon by the Tribunal and technical literature supported the view that the substance formed part of the manufacturing process and contributed to making the final product marketable. The Board's clarification was not accepted.

Conclusion: Phosphoric acid was held to be an input used in relation to the manufacture of sugar and not an apparatus; the Reference Application was dismissed.

Final Conclusion: The decision affirmed Modvat eligibility for phosphoric acid in the relevant manufacturing process and left the assessee's entitlement intact.

Ratio Decidendi: A material used in the manufacturing process, even if required only in certain cases, is an input for Modvat purposes when it is necessary to produce the final product in marketable form and is used in relation to manufacture.

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