Modvat credit on packing materials turns on inclusion in assessable value, and binding circulars constrain revenue's contrary stance.

Writ jurisdiction was maintainable where the Tribunal refused to make a reference, because the two-Judge hearing requirement in section 35J applies only when a matter is actually referred under section 35G. On Modvat credit, glass bottles and crates used for packing aerated water were eligible only if their cost formed part of the assessable value of the final product; the Board circular dated 13.09.1995 bound the revenue on that basis. Since the factual finding showed pro rata inclusion of the packing cost in assessable value, the matter fell within the circular and no substantial question of law arose for reference.

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Issues: (i) Whether a writ petition challenging rejection of a reference application was maintainable in view of the requirement of hearing by a bench of not less than two Judges under section 35J; (ii) Whether glass bottles and crates used for packing aerated water were eligible for Modvat credit where their value had been included on a pro rata basis in the assessable value, and whether the Board circular dated 13.09.1995 bound the revenue.

Issue (i): Whether a writ petition challenging rejection of a reference application was maintainable in view of the requirement of hearing by a bench of not less than two Judges under section 35J.

Analysis: The procedural bar in section 35J applies where a case is actually referred to the High Court under section 35G. It does not govern a situation where the Tribunal refuses to make a reference. The objection was therefore not sustainable against the writ petition.

Conclusion: The writ petition was maintainable on this ground.

Issue (ii): Whether glass bottles and crates used for packing aerated water were eligible for Modvat credit where their value had been included on a pro rata basis in the assessable value, and whether the Board circular dated 13.09.1995 bound the revenue.

Analysis: On the scheme of section 4 and rule 57A, Modvat credit on packing materials depends on whether the cost of such packing has been included in the assessable value of the final product. The Board circular clarified that credit on glass bottles and crates was available only where their value formed part of the assessable value, and the revenue was bound by that circular. The factual finding that the bottles and crates had been included on a pro rata basis brought the case within the circular. In those circumstances, no substantial question of law arose for reference.

Conclusion: The challenge to the Tribunal's view failed, and the refusal to refer the questions of law was upheld.

Final Conclusion: The Court found no merit in the writ petition and sustained the Tribunal's orders, resulting in dismissal of the revenue's challenge.

Ratio Decidendi: When a binding departmental circular grants a benefit subject to a factual condition, the revenue cannot argue against the circular while the factual condition is found satisfied; in such a case, no referable question of law arises.

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