Modvat credit on chlorine containers upheld where storage and transfer containers supported manufacture despite assessable value treatment.

Modvat credit was admissible on chlorine containers used in manufacture because Rule 57A allowed credit on goods used in or in relation to production, including storage and transfer equipment connected with the process. Prior decisions had already treated chlorine containers and similar cylinders as eligible inputs, and the mere non-inclusion of their value in the assessable value did not by itself justify denial of credit. In the absence of material showing a separate basis for disallowance, the credit denial was unsustainable.

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Issues: Whether Modvat credit on chlorine containers was admissible when the containers were used in the manufacture of the final product but their value was not included in the assessable value.

Analysis: Rule 57A of the Central Excise Rules, 1944 allowed credit of duty paid on goods used in or in relation to the manufacture of the final product. The Tribunal noted that the issue was already settled by earlier decisions holding chlorine containers and similar cylinders to be eligible for credit when they perform the functions of storage and transfer in connection with manufacture. The mere fact that the value of the containers was not included in the assessable value did not, by itself, justify denial of credit, especially when there was no material showing any separate proceeding on that ground.

Conclusion: Modvat credit on the chlorine containers was admissible, and the denial of credit was unsustainable.

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