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Issues: Whether Modvat credit under Rule 57-A of the Central Excise Rules was admissible in respect of duty paid on packing and forwarding charges collected for the inputs.
Analysis: Rule 57-A permits credit of duty paid on inputs used in or in relation to the manufacture of final products. The exclusion in the Explanation relating to packing materials applies only where the cost of such packing is not included in the assessable value of the final product under Section 4 of the Central Excise Act. On the facts, the Revenue did not show that the packing material cost was excluded from assessable value. The credit had been taken on the basis of duty paying documents, and the Central Excise officer at the recipient's end could not reassess the duty paid on the inputs; if duty was short-paid or excess-paid, the remedy lay at the supplier's end under the relevant demand or refund provisions.
Conclusion: Modvat credit on the duty paid toward packing and forwarding charges was admissible and the assessee succeeded.
Ratio Decidendi: Credit under the Modvat scheme is allowable to the extent of duty shown in valid duty paying documents, and the recipient authority cannot reassess the duty paid on inputs except where the statutory exclusion is established.
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