Consumable refrigerant gases used in manufacturing process qualify as inputs, making Modvat credit admissible.

Mafron/Freon gas used to chill monoethylene glycol in reactors and crystallisers was held to be an input used in relation to manufacture, because it secured the required temperature, reaction and crystallisation in the production process. The gases were treated as consumable inputs directly connected with manufacture, and not as part of the plant or mere maintenance material. On that basis, Modvat credit under Rule 57A was admissible.

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Issues: Whether Mafron/Freon gas used for chilling monoethylene glycol, which was circulated in reactors and crystallisers to achieve the required reaction and crystallisation, qualified as inputs used in or in relation to the manufacture of the final product so as to justify Modvat credit under Rule 57A of the Central Excise Rules.

Analysis: The gases, though refrigerant in nature, were used only to chill monoethylene glycol for circulation in the manufacturing equipment to secure the desired temperature, reaction, and crystallisation. They were not part of the machinery and were not used merely for maintenance or functioning of the plant. The governing principle applied was that an input need not be physically present in the final product if it is used in or in relation to manufacture. The gases were treated as consumable inputs directly connected with the manufacturing process.

Conclusion: The gases were eligible inputs used in relation to manufacture, and Modvat credit was admissible in favour of the assessee.

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