Modvat credit exclusion for crucibles used in sintering process bars treatment as eligible inputs

Silica glass crucibles used to hold phosphor mix during high-temperature sintering were held to fall within the exclusion in Rule 57A for apparatus or appliances used for producing or processing goods. Although Modvat credit is available for inputs used in or in relation to manufacture, the crucibles' ordinary function was to facilitate a change in the raw materials during processing, bringing them within the excluded category of equipment or apparatus. Their use in manufacture did not convert them into eligible inputs, so Modvat credit was unavailable.

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Issues: Whether silica glass crucibles used for sintering phosphor mix in the manufacture of fluorescent powder were eligible for Modvat credit under Rule 57A, or were excluded as equipment, apparatus, appliances, plant, machinery, or tools used for producing or processing goods.

Analysis: Modvat credit is available only for goods used in or in relation to the manufacture of final products, but the Explanation to Rule 57A excludes machines, machinery, plant, equipment, apparatus, tools, and appliances used for producing or processing goods or for bringing about any change in a substance. The crucibles were used to hold the raw materials during sintering at high temperature, and that function brought about a change in the raw materials during manufacture. On their ordinary meaning and on the manner of their use, the crucibles answered the description of apparatus or appliances. Since the goods themselves fell within the excluded category, their use in manufacture did not make them eligible inputs.

Conclusion: The crucibles were not eligible for Modvat credit and the appeal failed.

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