Modvat input credit denied for evaporator boats treated as excluded equipment in metallising manufacture.

Evaporator boats used in metallising and lacquering of polyester film were held not to qualify as Modvat inputs under Rule 57A because their true character and function was to act as containers or operational aids for vapourising aluminium wire in a high-vacuum system. Although they were used in the manufacturing process and wore out over time, they fell within the exclusion for machines, machinery, plant, equipment, apparatus, tools and appliances. Earlier credit decisions on different facts were distinguished, and the view treating such boats as excluded equipment was followed. Credit disallowance was upheld.

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Issues: Whether evaporator boats used in metallising and lacquering of polyester film were eligible for Modvat credit as inputs under Rule 57A or were excluded as tools, equipment or appliances.

Analysis: The deciding factor was the true character and use of the item in the manufacturing process. Although the evaporator boats were used in the process and were consumed over time, their function was to hold and facilitate vapourisation of aluminium wire in a high-vacuum metallising system. On the facts, they were treated as containers or operational aids rather than as inputs directly used in manufacture. The exclusion in the Explanation to Rule 57A covered machines, machinery, plant, equipment, apparatus, tools and appliances, and the item was held to fall within that excluded category. Earlier decisions allowing credit on different facts were distinguished, while the view treating evaporator boats as tools and equipment was followed.

Conclusion: Evaporator boats were not eligible inputs for Modvat credit under Rule 57A and the disallowance of credit was upheld.

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