Modvat credit for foundry chemicals and fluxes used in molten metal was recognised as manufacturing inputs.

Foundry chemicals and fluxes mixed into molten metal to remove impurities and impart required hardness were treated as essential ingredients in the manufacture of castings. Because their use in the process was admitted and they operated directly in relation to production, they were described as eligible inputs for Modvat credit. The note emphasises that such credit could not be denied merely on departmental objection where the materials functioned as part of the manufacturing process.

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Issues: Whether foundry chemicals and fluxes used in molten metal for removing impurities and providing the required hardness to the finished product were eligible inputs for Modvat credit.

Analysis: The use of the goods was admitted by the adjudicating authority. They were mixed in the molten metal and acted as ingredients to remove impurities and foreign particles from the castings. Such use showed that the items were essential in relation to the manufacture of the final product and could not be denied Modvat treatment merely on the Department's objection.

Conclusion: The goods were eligible inputs for Modvat credit and the Department's appeal failed.

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