Modvat credit for nickel catalyst used in manufacture was admissible even though it did not remain in the finished product.

Modvat credit was available on nickel catalyst used in soap manufacture even though the catalyst did not remain in the finished product. The scheme allowed credit on inputs used in or in relation to manufacture, and did not require physical incorporation into the final product. Because the catalyst accelerated the chemical reaction and formed part of the manufacturing process, it was treated as an admissible input. The denial of credit on the ground that the catalyst was neither a constituent of the final product nor a direct raw material was therefore unsustainable.

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Issues: Whether Modvat credit was admissible on nickel catalyst used in the manufacture of soap, even though it did not form part of the final product.

Analysis: The credit was denied on the premise that the catalyst was neither an input nor a constituent of the final product. The applicable Modvat scheme permitted credit on inputs used in or in relation to manufacture, and did not require that the input must remain present in the finished product. Catalyst is used to accelerate a chemical reaction and is part of the manufacturing process. On the reasoning already accepted in prior decisions, such use is sufficient to treat the catalyst as an input used in relation to manufacture.

Conclusion: Modvat credit on nickel catalyst was admissible and the denial of credit was unsustainable.

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