Indispensable manufacturing inputs need not remain in the finished product to qualify for proforma credit.

Aluminium sulphate used to treat spent lye and obtain crude glycerine was treated as an eligible input for proforma credit under Notification No. 201/79 because the relevant test was whether the finished product could emerge without the input's intervention, not whether the input remained physically present in the final product. An input that directly participates in and is indispensable to the manufacturing process is not disqualified merely because it does not form part of the finished goods. On that basis, the input was found to have entered the stream of manufacture and denial of proforma credit was unsustainable.

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Issues: Whether aluminium sulphate used in the treatment of spent lye for obtaining crude glycerine was an eligible input for proforma credit under Notification No. 201/79, and whether such input had to form part of the finished product.

Analysis: The input was used in the manufacturing process to remove impurities from spent lye and to make crude glycerine possible. The deciding test was not physical presence in the final product, but whether the final product could emerge without the intervention of the input. An input that directly participates in and is indispensable to the manufacturing stream is not disqualified merely because it does not remain in the finished goods.

Conclusion: The input was held to have entered the stream of manufacture and the denial of proforma credit was unsustainable.

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