Wide interpretation of 'used in relation to manufacture' supports Modvat credit for testing gas used in production.

Argon gas used for testing in-process material was treated as an input used in relation to manufacture because the testing formed an essential part of the production process. The phrase "used in or in relation to the manufacture" was given a wide meaning, extending to processes integrally connected with production even where the material does not become part of the finished product. Earlier Tribunal rulings on consumables and auxiliary materials used in manufacturing supported this approach. On that basis, Argon gas qualified for Modvat credit under Rule 57A and the assessee was held entitled to the credit.

---

---

Issues: Whether Argon Gas used for testing in-process material is an input used in or in relation to the manufacture of the final product so as to qualify for Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The gas was used in the testing of in-process material, and such testing was held to be an essential part of the manufacturing activity. The expression "used in or in relation to the manufacture" was treated as having a wide connotation, covering processes that are integrally connected with production even if the material does not enter the mainstream of manufacture or become part of the finished product. Earlier Tribunal decisions on consumables and auxiliary materials used in the manufacturing process supported the same approach.

Conclusion: Argon Gas was held to be used in relation to the manufacture of the final product and to fall within Rule 57A. The assessee was entitled to Modvat credit, and the appeal was dismissed.

---