MODVAT credit on essential refrigerant upheld where manufacture could not proceed without the cooling input.

MODVAT credit was treated as admissible on METRON-22 used as a refrigerant in manufacturing Tri-chloroethylene because the refrigerant was essential to the production process. The reasoning accepted was that an input need not itself take part in the chemical reaction to qualify; if the final product cannot be manufactured without it, credit may still be available. Earlier appellate and Government decisions supporting credit for essential refrigerants were relied on, and the departmental challenge failed.

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Issues: Whether MODVAT credit was admissible on METRON-22 used as a refrigerant in the manufacture of Tri-chloroethylene.

Analysis: The disputed product was used in the refrigeration plant to bring down temperature and was treated as an eligible input on the basis of earlier appellate and Government decisions allowing credit on refrigerants essential for the manufacturing process. The reasoning accepted was that a refrigerant needed for the manufacture of the final product, though not itself a raw material participating in chemical reaction, can qualify for Modvat credit when the product cannot be manufactured without it.

Conclusion: Modvat credit was held admissible on the refrigerant, and the departmental appeal failed.

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