Modvat credit on packing charges allowed where packed inputs were duty-paid and invoice segregation did not bar admissibility.

Modvat credit under Rule 57A was admissible on duty paid on packing charges where sheet glass and float glass were received in packed condition and duty had been paid on the packing value. The separate disclosure of packing charges and duty in the invoice did not change the character of the packing as part of the inputs used in manufacture, and that segregation alone could not justify exclusion from admissible credit. Denial of Modvat credit was therefore unsustainable, and the consequential penalty was also set aside.

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Issues: Whether Modvat credit under Rule 57A of the Central Excise Rules, 1944 was admissible on the duty paid on packing charges shown separately in the invoices of duly packed sheet glass and float glass.

Analysis: The input materials were received by the assessee duly packed, and duty had been paid on the value of such packing. The separate reflection of packing charges and duty in the invoices did not alter the character of the packing as part of the inputs received for use in manufacture. Since the packing charges had suffered duty and the goods were received in packed condition, the mere segregation of the amount in the invoice could not by itself exclude the packing charges from the scope of inputs under Rule 57A or justify denial of Modvat credit.

Conclusion: Modvat credit on the duty paid on packing charges was admissible and the denial of credit was unsustainable.

Final Conclusion: The disallowance of Modvat credit and the consequential penalty were set aside, and the assessee's appeal succeeded.

Ratio Decidendi: Where inputs are received in packed condition and duty is paid on the packing value, a separate disclosure of packing charges in the invoice does not, by itself, exclude those charges from the ambit of admissible Modvat credit under Rule 57A.

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