Modvat credit on manufacturing inputs upheld for lubricants, caustic soda and process chemicals used in sugar production.

Modvat credit was held admissible on lubricating oil and lubricating grease because they were used to lubricate machinery in sugar manufacture, and the nature of the product being manufactured did not affect their eligibility as inputs. Caustic soda was also treated as eligible, as it served cleaning and water-softening functions that were technological necessities in the process. Organo sulphur compounds qualified because the expression "in or in relation to manufacture" has wide scope and does not require direct physical use in the final product. Other organic compounds were accepted as inputs since they acted as viscosity reducers and improved purging and quality in sugar production, so the Revenue's objections were rejected.

---

---

Issues: Whether Modvat credit was admissible on lubricating oil, lubricating grease, caustic soda, organo sulphur compounds and other organic compounds used in the manufacture of sugar.

Analysis: Credit on lubricating oil and lubricating grease was upheld because such items were used for lubrication of machines and the distinction between manufacture of paper and sugar did not affect their eligibility as inputs. Caustic soda was held eligible as it was used for cleaning tubes, evaporators and pans and for water-softening purposes, which were treated as technological necessities in the manufacturing process. Organo sulphur compounds were accepted as inputs because the expression "in or in relation to the manufacture of" is of wide import and direct physical use in the final product is not required. The other organic compounds were also accepted since they functioned as viscosity reducers and improved purging and quality in the course of sugar manufacture.

Conclusion: Modvat credit was admissible on all the disputed items and the Revenue's objections were rejected.

---