MODVAT credit on photo film used in manufacture upheld where it helped make the camera marketable.

Photo film consumed in the factory to set camera parameters, eliminate distortion, secure parallelism and determine the least count was treated as used in relation to manufacture, not as a mere post-manufacture quality check. Because the film was employed during the manufacturing process to render the semi-automatic camera marketable, it qualified as material used in relation to manufacture for MODVAT credit. The film was therefore eligible for MODVAT credit.

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Issues: Whether photo film used and consumed in factory for setting camera parameters, eliminating distortion, and determining least count in the manufacture of a semi-automatic camera was eligible for MODVAT credit as material used in relation to manufacture.

Analysis: The film was not used merely for a post-manufacture quality check. It was employed during the manufacturing process to adjust the instrument, secure parallelism of the relevant planes, eliminate distortion, and fix the least count necessary for the camera to emerge as a marketable commodity. A material so used for rendering the final product marketable is treated as used in relation to manufacture for the purpose of MODVAT credit.

Conclusion: The photo film qualified for MODVAT credit.

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