Modvat credit on packing and forwarding charges remains admissible where duty is shown in the input documents

Modvat credit under Rule 57A is available on duty shown in duty-paying documents for inputs used in or in relation to manufacture, including packing-related charges where the statutory exclusion does not apply. The exclusion for packing materials is relevant only when the cost of such material is not included in the assessable value of the final product under Section 4. The recipient-side excise cannot reassess the duty paid on inputs for the purpose of denying credit; any short levy or excess duty must be addressed at the supplier's end under the applicable refund or demand provisions. On these principles, credit on packing and forwarding charges was admissible.

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Issues: Whether Modvat credit under Rule 57A of the Central Excise Rules was admissible on duty paid on packing and forwarding charges collected in respect of inputs.

Analysis: Rule 57A permits Modvat credit on duty paid inputs used in or in relation to the manufacture of the final product. The exclusion in the explanation for packing materials applies only where the cost of such packing material is not included in the assessable value of the final product under Section 4. On the facts, it was not the Revenue's case that the value of the packaging material was outside assessable value so as to attract the exclusion. The duty had been taken on the basis of duty-paying documents, and the Tribunal's earlier view was applied that the Central Excise officer at the recipient's end cannot reassess duty paid on inputs for Modvat purposes; any short levy or excess duty has to be dealt with at the supplier's end under the relevant refund or demand provisions.

Conclusion: Modvat credit on the duty paid on packing and forwarding charges was admissible and the assessee's appeal succeeded.

Ratio Decidendi: Credit under the Modvat scheme is allowable to the extent duty is shown in the duty-paying document for inputs received, and reassessment of the duty on such inputs cannot be undertaken at the recipient's end for purposes of denying credit.

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