Consumable refrigerant gases treated as manufacturing inputs qualify for Modvat credit and are not excluded as plant or equipment.

Mafron and Freon used for chilling monoethylene glycol were treated as consumable inputs used in relation to manufacture, because their circulation was necessary to maintain process temperature and produce the final product of proper quality. They therefore qualified for Modvat credit under Rule 57A read with Rule 57G. The gases were not regarded as part of the plant or equipment, and repeated circulation through the refrigerating system did not change their character. On the facts found, no mixed question of fact and law arose, so no reference to the High Court was called for.

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Issues: (i) whether refrigerent gases Mafron and Freon were inputs used in or in relation to the manufacture of the final product for purposes of Modvat credit under Rule 57A read with Rule 57G of the Central Excise Rules, 1944; (ii) whether the gases were excluded as part of the plant, equipment, or otherwise hit by the exclusion clause in Rule 57A, and whether the reference application raised any mixed question of fact and law warranting a reference to the High Court.

Issue (i): whether refrigerent gases Mafron and Freon were inputs used in or in relation to the manufacture of the final product for purposes of Modvat credit under Rule 57A read with Rule 57G of the Central Excise Rules, 1944

Analysis: The gases were brought in cylinders and used for chilling monoethylene glycol to maintain the required temperature so that the chemical reaction could take place and the final product of the proper quality could be produced. Their circulation in the plant was necessary for the manufacturing process. They were therefore comparable to other consumable gases used in the course of manufacture and were not merely items supporting the operation of machinery.

Conclusion: The gases were inputs used in relation to manufacture and were eligible for Modvat credit.

Issue (ii): whether the gases were excluded as part of the plant, equipment, or otherwise hit by the exclusion clause in Rule 57A, and whether the reference application raised any mixed question of fact and law warranting a reference to the High Court

Analysis: The gases, though used repeatedly in circulation, remained consumable inputs and did not become part of the compressor or plant. Their periodic replacement and use through the medium of the refrigerating system did not alter their character. On the facts found, the legal position under Rule 57A was clear, and no real distinction existed from the earlier treatment of comparable consumable gases. The controversy did not raise a mixed question of fact and law requiring reference.

Conclusion: The exclusion clause did not apply and no reference to the High Court was called for.

Final Conclusion: The reference application failed because the gases were treated as consumable inputs used in manufacture and the matter did not disclose any referable question of law.

Ratio Decidendi: A gas brought in cylinders and used as an essential consumable in the manufacturing process, even if circulated repeatedly through machinery, remains an input used in relation to manufacture and is not treated as part of the plant or equipment for exclusion under Modvat rules.

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