Modvat credit on duty-paid packing inputs used in biscuit manufacture was held admissible despite secondary packing use.

Duty-paid inputs used in the manufacture of final products qualify for Modvat credit under Rule 57A, even where the items such as adhesive, liquid and tapes are used in secondary packing of biscuits. The relevant principle is that credit cannot be denied merely because the inputs relate to packing activity or because of a contrary view on assessability of the goods. Modvat credit was held admissible, and the denial of credit was unsustainable.

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Issues: Whether Modvat credit could be denied on inputs such as adhesive, liquid and tapes used in secondary packing of biscuits.

Analysis: The inputs had suffered duty and were used in the manufacture of the final products. In view of the settled position under Rule 57A, Modvat credit is available on duty-paid inputs used for manufacture, and it cannot be denied on the ground that the inputs relate to packing activity or on a contrary view of the assessability of the goods.

Conclusion: Modvat credit was admissible and the denial of credit was unsustainable.

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