Modvat credit on process-control equipment allowed where cables, sensors and power supply units were used in manufacture.

Modvat credit was held admissible on the disputed cables, wires, sensors and power supply units because they were used in or in relation to manufacture. The Larger Bench view already supported admissibility for cables and wires, and the remaining items were found essential for temperature and pressure control in the manufacturing process. On that reasoning, process-control equipment forming part of manufacture qualified for Modvat credit, and the department's challenge failed.

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Issues: Whether Modvat credit was admissible on the disputed items, including cables and wires and other equipment used in the manufacturing process.

Analysis: The eligibility of cables and wires for Modvat credit had already been concluded in favour of admissibility by the Larger Bench decision relied upon in the order. As to the remaining items, the record showed that the sensors and power supply units were used for temperature control and pressure control in the manufacturing process, and were essential for completion of manufacture. The settled view applied was that items used in or in relation to the manufacture of finished products qualify for Modvat credit.

Conclusion: Modvat credit was admissible on all the disputed items, and the department's challenge failed.

Final Conclusion: The common order affirmed eligibility of Modvat credit across the disputed items and left the assessee with relief on the merits.

Ratio Decidendi: Articles or equipment that are used in or in relation to the manufacture of the finished product, including those serving an essential process-control function, are eligible for Modvat credit.

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