Modvat credit for grinding wheels used in manufacture allowed where machine parts serve the production process.

Grinding wheels used in grinding machines were treated as inputs eligible for Modvat credit under Rule 57A because the decisive test was whether the goods were used in or in relation to manufacture and fell within the broad ambit of input. The Tribunal applied the larger bench view that materials connected with the manufacturing process, including machine parts used for that process, are not excluded merely because they are fixed on machinery. On that basis, grinding wheels qualified as inputs and the denial of Modvat credit was set aside in favour of the assessee.

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Issues: Whether grinding wheels used in grinding machines are inputs eligible for Modvat credit under Rule 57A.

Analysis: The decisive test was whether the goods were used in or in relation to the manufacture of the final product and whether parts of machines could fall within the wide ambit of input. The Tribunal applied the larger bench view that materials concerned with the manufacturing process, including machine parts used for the process, are not excluded merely because they are fixed on machinery.

Conclusion: Grinding wheels were held to be inputs under Rule 57A and the denial of Modvat credit was set aside in favour of the assessee.

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