Modvat credit on lubricating oils used in manufacturing operations was admissible where the use was integral to production.

Modvat credit under Rule 57A was held admissible for lubricating oil, hydraulic oil and gear oil used in manufacturing operations. The Tribunal applied the principle that use "in relation to" manufacture extends beyond direct input into production and covers processes integrally connected with manufacture, including lubrication necessary for efficient operation of machinery. On the facts, the oils were used both for machine lubrication and on materials during the process, and they did not fall within the rule's excluded category. No question of law was found fit for reference.

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Issues: Whether Modvat credit was admissible under Rule 57A on lubricating oil, hydraulic oil and gear oil used in the manufacturing process and for lubrication of machines.

Analysis: The application challenged the Tribunal's view that the oils qualified as inputs. The Tribunal had relied on earlier decisions, including a Larger Bench ruling, and on the principle that the expression "in the manufacture" covers processes so integrally connected with production that manufacture would be commercially inexpedient without them. Rule 57A extends beyond direct use in manufacture to use "in relation to" manufacture. On the facts, the oils were used not only for lubricating machinery but also on the materials during the manufacturing process, and such use satisfied the statutory requirement. The items did not fall within the excluded category under the Explanation to the rule.

Conclusion: Modvat credit was admissible on the oils under Rule 57A, and no question of law arose for reference.

Ratio Decidendi: Goods used in a process integrally connected with production, including lubrication necessary for manufacturing operations, are used "in relation to" manufacture for Rule 57A purposes.

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