Modvat credit on furnace oil used to generate electricity for cement manufacture was treated as admissible as an eligible input.

Furnace oil used to generate electricity consumed in cement manufacture was treated as an eligible Modvat input because Rule 57A covered inputs used as fuel, and the phrase "in or in relation to" manufacture was read broadly to include fuel oil used within the manufacturing process. On that basis, the oil was regarded as sufficiently connected with production of the final product, and Modvat credit was admissible.

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Issues: Whether furnace oil used for generation of electricity, which was in turn used in manufacture of cement, was admissible as an input for Modvat credit.

Analysis: Rule 57A recognised inputs used as fuel for Modvat credit. The expression "in or in relation to" manufacture was treated as wide enough to cover fuel oil used for generating electricity within the manufacturing process. On that basis, furnace oil was regarded as an input connected with manufacture of the final product.

Conclusion: Furnace oil was held to be an input and Modvat credit thereon was admissible in favour of the assessee.

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