Broad "used in relation to manufacture" exemption applied to sand mix used for moulds in steel casting production.

Sand mix used to prepare sand moulds for steel castings was treated as an input used in relation to manufacture because the moulds were invariably employed in producing the final castings. The expression "used in relation to the manufacture" was read broadly to cover materials with a direct nexus to an intermediate article used in the production process, not only items physically consumed in the final stage. On that basis, the sand mix qualified for exemption under Notification No. 217/86 and was not liable to duty under the view taken by the lower authorities.

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Issues: Whether sand mix used for preparing sand moulds, which are in turn used in the manufacture of steel castings, is an input used in relation to the manufacture of steel castings and therefore exempt under Notification No. 217/86.

Analysis: The expression "used in relation to the manufacture" is of wide import and extends beyond materials directly consumed in the final physical or chemical process. Sand mix, though first used to make sand moulds, has a direct nexus with the manufacture of steel castings because the moulds are invariably employed in that process. On that reasoning, the sand mix qualifies as an input used in relation to manufacture of the final product.

Conclusion: Sand mix is covered by the exemption under Notification No. 217/86 and is not liable to duty on the footing adopted by the lower authorities.

Final Conclusion: The impugned order was set aside and the appeal was allowed because the intermediate sand mix was treated as an exempt input connected with the manufacture of steel castings.

Ratio Decidendi: An item used to prepare an intermediate article that is invariably employed in the manufacture of the final product is an input used in relation to manufacture for the purpose of exemption.

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