MODVAT input eligibility turns on use in manufacture, with furnace lining items distinguished from apparatus in the process.

Ramming mass and garnex board were treated as capable of qualifying as MODVAT inputs where they served a refractory lining function and were used in or in relation to the manufacture of iron and steel, so a referable question of law was considered to arise in favour of the assessee. Foundry grade slab was treated differently because it was used to measure temperature and was regarded as apparatus in the manufacturing process, placing it in the excluded category for MODVAT credit, so no referable question of law arose on that item.

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Issues: (i) Whether ramming mass and garnex board could be treated as inputs used in or in relation to the manufacture of iron and steel for the purpose of MODVAT credit under Rule 57A of the Central Excise Rules, 1944, and whether a question of law arose for reference; (ii) Whether foundry grade slab gave rise to a referable question of law on its eligibility for MODVAT credit.

Issue (i): Whether ramming mass and garnex board could be treated as inputs used in or in relation to the manufacture of iron and steel for the purpose of MODVAT credit under Rule 57A of the Central Excise Rules, 1944, and whether a question of law arose for reference.

Analysis: Ramming mass was treated as an eligible input in earlier binding decisions relied upon by the Tribunal, and garnex board was found to serve a similar refractory lining function. On that footing, the use of both items in connection with furnace lining was considered capable of supporting MODVAT eligibility, raising a question of law fit for reference.

Conclusion: A question of law was referred to the High Court in favour of the assessee on ramming mass and garnex board.

Issue (ii): Whether foundry grade slab gave rise to a referable question of law on its eligibility for MODVAT credit.

Analysis: The slab was found to be used for measuring temperature and, in that context, to fall within the nature of an apparatus in the manufacture of steel, placing it in the excluded category for MODVAT purposes. On that reasoning, no referable question of law arose.

Conclusion: No question of law was referred in relation to foundry grade slab, which was against the assessee.

Final Conclusion: The reference was allowed only on the items treated as capable of supporting MODVAT eligibility, while the claim relating to foundry grade slab was not accepted for reference.

Ratio Decidendi: Items used as furnace lining or refractory material may qualify as inputs for MODVAT purposes if they are used in or in relation to manufacture, but articles functioning as apparatus in the manufacturing process fall within the excluded category.

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