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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether chemicals used for purification of water for generating steam, which was in turn used in the manufacture of Vinyl Acetate Monomer, were eligible inputs for Modvat credit, and whether the reference application raised a question of law fit for reference.
Analysis: The questions framed by the Revenue were found to be unclear and one of them related only to the order of the Collector (Appeals), which was not a proper subject for reference. On merits, the use of chemicals in water treatment for production of steam was treated as part of the manufacturing chain because the steam was necessary for manufacture of the final product. The decision relied on the settled principle that all processes and materials required to render the final product marketable and to complete manufacture fall within the manufacture process, and therefore such chemicals were to be regarded as inputs for the final product.
Conclusion: The chemicals used for water purification for generating steam were eligible as inputs for Modvat credit, and no referable question of law arose.
Ratio Decidendi: Materials used in an intermediate process essential to manufacture the final product are treated as inputs for Modvat purposes when they form part of the manufacturing process leading to the final excisable product.
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