Modvat credit and manufacture: re-packing and testing of bulk goods into marketable packs supported credit where duty was paid on the final product.

Re-packing, testing and inspection of bulk goods into smaller marketable packs, carried out with machinery and followed by clearance on payment of duty, was treated as manufacture within the inclusive definition in Section 2(f) of the Central Excise Act, 1944. On those concurrent factual findings, Modvat credit could not be denied merely on the footing that no manufacture had taken place, because the final product had suffered duty. The High Court also noted that the Tribunal and the Commissioner (Appeals) had reached the same conclusion on the evidence, so no substantial question of law arose for consideration.

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Issues: Whether the assessee was entitled to Modvat credit when the activity of re-packing and testing of bulk goods into smaller marketable packs was held to amount to manufacture under Section 2(f) of the Central Excise Act, 1944, and whether any substantial question of law arose from the concurrent findings of fact.

Analysis: The appellate authority found that the assessee received goods in bulk, carried out testing and inspection, repacked them into smaller containers with machinery, and cleared them on payment of duty. On those facts, the process was held to amount to manufacture within the inclusive definition in Section 2(f) of the Central Excise Act, 1944. The Tribunal followed the assessee's earlier case and held that if duty is levied on the final product, Modvat credit cannot be denied merely on the ground that there was no manufacture. Both the Commissioner (Appeals) and the Tribunal returned concurrent findings after appreciating the evidence.

Conclusion: Modvat credit could not be denied, and no substantial question of law arose for consideration.

Ratio Decidendi: Where the lower authorities concurrently find on evidence that the process amounts to manufacture and duty is levied on the final product, Modvat credit cannot be denied on the inconsistent footing that there was no manufacture.

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