Modvat credit on carry bags with footwear cartons denied for lack of manufacturing nexus and post-sale use only.

Plastic carry bags enclosed with footwear cartons were held not to qualify for Modvat credit as inputs or packing materials under Rule 57A and Rule 57B(1)(v) of the Central Excise Rules, 1944. The bags were not used directly or indirectly in manufacture, nor were they used in relation to manufacture; they merely facilitated the consumer's carrying of the footwear after sale, making them part of a post-manufacture activity. Inclusion of their cost in the assessable value did not establish the required manufacturing nexus. Earlier Tribunal authority on similar carry bags was applied, while the cited Supreme Court and motor vehicle decisions were found inapplicable.

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Issues: Whether plastic carry bags enclosed with footwear cartons were eligible for Modvat credit as inputs or packing materials under Rule 57A and Rule 57B(1)(v) of the Central Excise Rules, 1944.

Analysis: The carry bags were not used in the manufacture of footwear, either directly or indirectly, and were not even used in relation to manufacture. They were placed in the cartons only to facilitate the consumer's carrying of the footwear after sale, which made them part of a post-manufacture activity. Inclusion of their cost in the assessable value did not by itself establish eligibility for credit. The earlier Tribunal decision on similar carry bags was treated as covering the issue, and the cited Supreme Court and motor vehicle decisions did not assist because they did not establish the required nexus between the bags and manufacture.

Conclusion: The plastic carry bags were not eligible inputs for Modvat credit, and the claim failed against the assessee.

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