Consumables used in manufacturing may qualify as Modvat inputs when they keep equipment operational and aid production.

Consumables used to keep manufacturing equipment operational or to facilitate the manufacturing process may qualify as Modvat inputs if they are used in or in relation to manufacture and are not covered by the exclusion in Rule 57A. Trichloro ethylene used to clean filter meshes was treated as an input because it helped prevent clogging and maintain effective production, even though it was not used continuously. Silicon spray used to lubricate jet interiors was likewise treated as an input because it eased the passage of material and avoided clogging. The commentary thus states that periodic use does not by itself defeat Modvat eligibility.

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Issues: (i) Whether trichloro ethylene used for cleaning the meshes of the filter used in the manufacture of yarn was admissible as Modvat credit as an input; (ii) Whether silicon spray used for lubricating the inner portion of the jets to facilitate manufacture was admissible as Modvat credit as an input.

Issue (i): Whether trichloro ethylene used for cleaning the meshes of the filter used in the manufacture of yarn was admissible as Modvat credit as an input.

Analysis: The filter and its meshes were treated as items used in or in relation to manufacture because they were necessary to remove solid particles and avoid clogging in the spinnerette. A chemical used to keep the filter in working order so that the manufacturing process could continue effectively was treated as an input. The absence of continuous use did not defeat eligibility, and the item was not excluded by the Explanation to Rule 57A.

Conclusion: Trichloro ethylene qualified as an input and Modvat credit was admissible, in favour of the assessee.

Issue (ii): Whether silicon spray used for lubricating the inner portion of the jets to facilitate manufacture was admissible as Modvat credit as an input.

Analysis: Silicon spray was found to be used in relation to manufacture by easing the passage of molten material through the jets and preventing clogging. It was not treated as machinery, plant, equipment, apparatus, tools or appliances within the exclusion. On the adopted reasoning, it fell within the scope of input for Modvat purposes.

Conclusion: Silicon spray qualified as an input and Modvat credit was admissible, in favour of the assessee.

Final Conclusion: The common order confirmed eligibility to Modvat credit for both disputed items, and the departmental orders were set aside.

Ratio Decidendi: A consumable used to keep manufacturing equipment operational or to facilitate the manufacturing process, even if used periodically and not continuously, is an input for Modvat purposes if it is used in or in relation to manufacture and is not excluded by Rule 57A.

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