Modvat credit on films used in laminated sheet manufacture upheld where the goods formed part of the production process.

Polypropylene films used as a separating agent in the manufacture of paper-based laminated sheets were treated as eligible for Modvat credit because they formed part of the manufacturing process and were not shown to fall within any exclusion under the credit scheme. The Tribunal followed its earlier view that BOPP films used in laminated decorative sheet production qualified for credit, and held that the denial of Modvat credit could not be sustained. The operative principle is that films used in making laminated sheets are creditable where their use is integral to manufacture and the scheme does not exclude them.

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Issues: Whether polypropeline films used as a separating agent in the manufacture of paper based laminated sheets were eligible for Modvat credit.

Analysis: The goods in question were used in the manufacture of laminated sheets and the dispute turned on whether they could be treated as appliances so as to deny credit. The Tribunal relied on its earlier decision holding that BOPP films used in the manufacture of laminated decorative sheets qualified for Modvat credit. On that basis, the order denying credit could not be sustained.

Conclusion: The credit was held to be admissible and the denial of Modvat credit was set aside.

Ratio Decidendi: Films used in the manufacture of laminated sheets, where employed as part of the manufacturing process, are eligible for Modvat credit if they are not excluded by the governing credit scheme.

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