Input credit for cutting oil and quenching oil upheld where both had a direct nexus with the forging process.

Credit under Rule 57A was admissible for cutting oil and quenching oil used in forging manufacture because the relevant test is whether the inputs are used in or in relation to manufacture, a wider standard than the language of the cited notification. The quenching oil used in hardening and the cutting oil used to maintain temperature had a direct nexus with the manufacturing process, so the Revenue's objection failed. An earlier ruling under a different notification dealing with raw materials or components was held not to govern this issue.

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Issues: Whether credit under Rule 57A of the Central Excise Rules, 1944 was admissible on cutting oil and quenching oil used in the manufacture of forgings.

Analysis: The relevant test under Rule 57A is whether the goods are used in or in relation to the manufacture of the final product, a phrase of wider amplitude than the language relied upon in the cited notification. The use of quenching oil in the hardening process and cutting oil for maintaining temperature during the manufacturing operation showed a direct nexus with manufacture. The earlier decision under a different notification, dealing with raw materials or components, did not control the present issue.

Conclusion: Credit on cutting oil and quenching oil was admissible and the objection of Revenue failed.

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