Modvat credit on in-house handling materials is available where crates are used in relation to manufacture.

Plastic crates used for in-house movement of goods within the factory were treated as eligible for Modvat credit because they were used in relation to manufacture and not excluded merely for not forming part of the final product. Applying the principle recognised for bins and trolleys used inside the factory, the Tribunal held that such handling materials fell within the credit framework where the governing notification used language similar to the Modvat scheme. The respondents were therefore entitled to Modvat credit on the crates.

---

---

Issues: Whether plastic crates used as handling material for in-house movement of goods within the factory were eligible for Modvat credit.

Analysis: The dispute turned on whether the crates could be treated as inputs used in or in relation to the manufacture of the final product. The settled position, as applied by the Tribunal, was that where goods are used within the factory in relation to manufacture, and the governing notification operates on language similar to the Modvat scheme, such items are not excluded merely because they do not directly enter the final product. Reliance was placed on the Supreme Court ruling on bins and trolleys used within the factory, which treated such items as covered by the exemption framework.

Conclusion: The respondents were entitled to Modvat credit on the plastic crates.

---