Modvat credit for maintenance inputs fails where goods are used only as corrosion inhibitors and not in manufacture.

Modvat credit was denied because the items were used only as corrosion inhibitors in cooling water and steam generation systems and for maintenance of machinery, not as ingredients or inputs in the manufacture of synthetic rubber. The cited authorities were distinguished on the basis that credit is available only where goods are used directly in manufacture or are so integrally connected with the process that they enter into or are required for production of the final product. As the dispute turned on these factual findings, no referable question of law arose under Rule 57A.

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Issues: Whether the reference application disclosed any referable question of law on the entitlement to Modvat credit for items used as corrosion inhibitors and for maintenance of machinery under Rule 57A of the Central Excise Rules, 1944.

Analysis: The items were found, on the facts, to be used only as corrosion inhibitors in the cooling water and steam generation systems and not as ingredients or inputs in the manufacture of synthetic rubber. The distinction drawn in the relied upon authorities was that credit is available only where the goods are used directly in the manufacture or are so integrally connected with the process that they enter into or are required for the manufacture of the final product. Here, the use was confined to maintenance of machinery and not to the manufacture of the final product. The dispute was therefore factual, and the cited authorities did not create any conflicting legal position applicable to these facts.

Conclusion: No referable question of law arose, and the claim to Modvat credit on these items failed.

Ratio Decidendi: Where goods are used only for maintenance of machinery, such as as corrosion inhibitors, and not in or in relation to the manufacture of the final product, the issue is one of fact and does not give rise to a referable question of law under Rule 57A.

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