Modvat credit on packed goods cannot be reversed merely because packing material was cleared, absent input status and statutory conditions.

Credit availed on soda ash could not be reversed on the basis that the jute bags in which it was received were cleared as inputs as such. The duty document showed duty paid on the soda ash, and the inclusion of the jute bags' value in the assessable value did not make the duty one paid on the bags themselves. As the jute bags were neither declared nor used as inputs, their clearance did not satisfy Rule 57F(1)(ii). The Tribunal relied on its earlier decision, affirmed by the Supreme Court, and held that reversal of Modvat credit was not justified.

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Issues: Whether credit taken on soda ash could be reversed on the footing that the jute bags in which the soda ash was received were cleared as such as inputs.

Analysis: The credit was availed on the duty paid on soda ash, not on the jute bags. The duty document reflected duty on soda ash, and the inclusion of the value of jute bags in the assessable value did not convert the payment into duty paid on the bags themselves. Since the jute bags were neither declared nor used as inputs, their clearance could not be treated as clearance of inputs as such under Rule 57F(1)(ii). The Tribunal's earlier decision on similar facts, affirmed by the Supreme Court, covered the dispute.

Conclusion: The reversal of credit was not justified and the issue was decided in favour of the assessee.

Final Conclusion: The order requiring reversal of Modvat credit on jute bags was unsustainable and was set aside, resulting in allowance of the appeal.

Ratio Decidendi: Where duty credit is taken on the principal goods received in packing, the packing material cannot be treated as inputs cleared as such unless it was itself taken as an input and the statutory conditions for reversal are satisfied.

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