Modvat credit on processing medium allowed where aluminium oxide grit was an input, not the tool used in manufacture.

Aluminium oxide grit used in preparing printing plates was treated as an input eligible for Modvat credit because it functioned only as a scouring medium in the manufacturing process. The material did not itself carry out the graining operation; that function was performed by motorised disc brushes, which were the tool. As the grit was required for manufacture and was not itself a tool within the excluded category under the Explanation to Rule 57A, credit was held admissible to the assessee.

---

---

Issues: Whether aluminium oxide grit used in the manufacture of printing plates was an input eligible for Modvat credit, or a tool falling within the excluded category under Explanation to Rule 57A.

Analysis: The aluminium oxide grit was used to impart the requisite roughness or graining to the aluminium plates so that the photosensitive coating would adhere properly. The grits by themselves did not roughen the plates; effective graining occurred only when the plates, with the grits on them, were brushed by motorised disc brushes. On that reasoning, the brushes were the tool in the process and the grit functioned only as a scouring medium. Since the grit was required in the manufacturing process and was not itself a tool, it did not fall within the excluded category of inputs.

Conclusion: Aluminium oxide grit was an input and Modvat credit was admissible; the issue was decided in favour of the assessee.

Ratio Decidendi: A material used in manufacture is an input eligible for credit if it functions only as a processing medium and not as the tool by which the manufacturing operation is carried out, even where it is essential to achieving the required product characteristics.

---