Modvat credit on car fitments allowed where audio and clock assemblies formed integral parts of deluxe model vehicles.

Modvat credit was held admissible on clock assemblies, audio systems, radio sets and speaker sets used in the manufacture of deluxe model motor cars. The items were treated as integral and essential to making the deluxe model commercially viable and marketable, and the fact that the vehicle could function without them was not decisive. The contrary precedent was distinguished on facts, while authorities allowing credit for inputs forming an integral part of the marketed product were followed. The Revenue's challenge therefore failed.

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Issues: Whether Modvat credit was admissible on clock assemblies, audio systems, radio sets and speaker sets used in the manufacture of deluxe model motor cars.

Analysis: The products were used in the manufacture of deluxe model cars and their use was not disputed. The authority accepted that these items were absolutely essential for making the deluxe model commercially viable and marketable. The distinction drawn by the Revenue that the vehicle could operate without such fitments was not accepted, since the manufacturing activity concerned a deluxe model and not merely a basic motor car. The cited precedent against eligibility was distinguished on facts, while the decisions supporting credit for items forming an integral part of the marketed product were followed.

Conclusion: Modvat credit was admissible on the items in question and the Revenue's challenge failed.

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