Modvat credit for cleaning inputs was allowed where Triethylene Glycol was used as an integral part of manufacture.

Triethylene Glycol used to clean machinery in the production of polyester staple fibre and polyester yarn can qualify for Modvat credit if the cleaning is an essential and integral part of the manufacturing process. Rule 57A extends beyond direct physical or chemical use and covers inputs used in relation to manufacture. Where the equipment must be cleaned to keep the production process going and the use is connected with manufacture, the input is not excluded as mere machinery maintenance. On that basis, cleaning use of Triethylene Glycol was treated as eligible input and credit was admissible.

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Issues: Whether Triethylene Glycol used for cleaning machinery in the course of producing polyester staple fibre and polyester yarn was eligible for Modvat credit as an input used in or in relation to manufacture.

Analysis: Modvat eligibility under Rule 57A turns not only on direct use in the physical or chemical process of manufacture, but also on use in relation to manufacture. An article used to clean equipment through which the product is manufactured may still qualify if the cleaning is an essential and integral part of the manufacturing process. The exclusion cannot be applied by treating such use as mere maintenance of machinery when the process is necessary to keep production going and is connected with manufacture.

Conclusion: Triethylene Glycol used for cleaning the manufacturing equipment was held to be an input used in relation to manufacture, and Modvat credit was admissible in favour of the assessee.

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