Modvat credit for packed plastic droppers upheld where they formed part of the marketed medicine pack.

Plastic droppers packed with pediatric drops and cleared together at the factory gate were treated as inputs used in or in relation to manufacture under the Modvat scheme. Applying the functional nexus and value-addition approach under Rule 57A of the Central Excise Rules, 1944, the court accepted that an article supplied as part of the marketed product pack can qualify for admissible input treatment when it forms an integral part of the final product as sold. The reference was answered in favour of the assessee, confirming entitlement to Modvat credit for the droppers.

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Issues: Whether plastic droppers packed along with pediatric drops and cleared at the factory gate in that condition could be treated as input used in or in relation to the manufacture of the final product for the purpose of Modvat credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: The issue was held to be covered by an earlier decision answering an identical reference. The governing test was whether the article formed part of the inputs used in or in relation to manufacture under the Modvat scheme, having regard to the concept of value addition. On that basis, the plastic dropper supplied with the medicine pack and marketed together with it was treated as falling within the scope of admissible input.

Conclusion: The question was answered in the affirmative, and the plastic dropper was held to be an input used in or in relation to the manufacture of the final product.

Final Conclusion: The reference was disposed of by affirming the assessee's entitlement to Modvat treatment for the plastic droppers.

Ratio Decidendi: An article supplied as part of the marketed product pack may qualify as an input used in or in relation to manufacture under the Modvat scheme if it satisfies the functional nexus required by Rule 57A of the Central Excise Rules, 1944.

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