MODVAT credit for titanium anodes used in electrolytic manufacture is supported where they are inputs in relation to manufacture.

Coated titanium anodes used as electrodes in the electrolytic manufacture of caustic soda are treated as inputs used in relation to manufacture for MODVAT credit under Rule 57A(i). The commentary relies on earlier rulings allowing credit for graphite electrodes and titanium metal anodes, and on the principle that the exclusion for machines, machinery, plant and similar items applies to those items themselves, not to parts or materials used in the process. On that basis, titanium anodes fall outside the exclusion and qualify for credit.

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Issues: Whether coated titanium anodes used as electrodes in the electrolytic process for manufacture of caustic soda are eligible as inputs for MODVAT credit under Rule 57A(i) of the Central Excise Rules, 1944.

Analysis: The Tribunal noted that prior decisions had allowed MODVAT credit on graphite electrodes and titanium metal anodes used in similar electrolytic processes. It further followed earlier decisions holding that titanium anodes were not covered by the exclusion for machines, machinery, plant, etc., because the exclusion applies to the listed items themselves and not to parts or materials used in the process. On that basis, the use of titanium anodes was treated as use in relation to manufacture within Rule 57A.

Conclusion: Titanium anodes were held to be eligible inputs for MODVAT credit, and no question of law arose for reference.

Ratio Decidendi: Materials used in the manufacturing process may qualify as inputs for MODVAT credit when they are used in relation to manufacture and are not themselves excluded as machines, machinery, plant or similar items.

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