Modvat credit on consumable items used in manufacture upheld where exclusion for machinery did not apply.

Silicon oil, tungsten coil and kiln wrap were treated as eligible Modvat inputs under Rule 57A because each was used in or in relation to manufacture and none fell within the specific exclusion clause. Silicon oil was periodically replaced in the diffusion pump to create vacuum in glass shells, tungsten coil was a consumable item used in the coating process despite being fitted in machinery, and kiln wrap protected glass panels during handling and transport before marketability. The exclusion of plant or machinery did not automatically extend to such consumable items used with machinery, and a wide meaning was given to the expression used in or in relation to manufacture.

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Issues: Whether silicon oil, tungsten coil and kiln wrap were eligible inputs for Modvat credit under Rule 57A.

Analysis: Silicon oil was used in the diffusion pump to create vacuum in the glass shells and was periodically replaced, so it was an item used in the manufacture and not excluded merely because it was used in machinery. Tungsten coil was fitted in the machine, enabled the coating process, and was consumed in the course of manufacture; the exclusion of machinery did not extend to such consumable items used in the machinery. Kiln wrap protected the glass panels during handling and transportation before the final product became marketable, and the expression used in or in relation to manufacture had to receive a wide meaning. None of the three items fell within the exclusion clause of Rule 57A.

Conclusion: All three items were eligible inputs and Modvat credit was admissible in favour of the assessee.

Ratio Decidendi: For Rule 57A, goods used in the manufacturing process or in relation to manufacture are eligible inputs unless they are specifically excluded, and the exclusion of plant or machinery does not automatically exclude consumable items used in or with such machinery.

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