Packaging materials essential for marketable cement qualify as inputs for MODVAT credit under Rule 57A.

Paper bags used for packing cement qualify as inputs used in or in relation to the manufacture of cement under Rule 57A of the Central Excise Rules, 1944, because packaging necessary to make the product marketable in the wholesale market forms part of the manufacturing process. The wide and inclusive scope of Rule 57A covers packaging materials, and the exclusionary provisions did not apply to paper bags used for cement. MODVAT credit was therefore available on the duty paid on such paper bags.

---

---

Issues: Whether paper bags used for packing cement are inputs used in or in relation to the manufacture of cement so as to qualify for MODVAT credit under Rule 57A of the Central Excise Rules, 1944.

Analysis: Rule 57A adopts a wide and inclusive approach to inputs, covering goods used in or in relation to the manufacture of final products and specifically recognising packaging materials. The Court applied the settled principle that the expression "in relation to" must receive a broad construction and that packaging necessary to place goods in the condition in which they are generally sold in the wholesale market forms part of the manufacturing process. Cement is ordinarily marketed in packed condition, and the paper bags used for such packing are integral to making the product marketable and are not a mere post-manufacture step. The exclusionary parts of the rule did not apply to paper bags used for cement.

Conclusion: Paper bags used for packing cement are inputs used in or in relation to the manufacture of cement and the petitioners are entitled to MODVAT credit on the duty paid thereon.

Ratio Decidendi: Packaging materials essential for marketing the final product and used to place it in the condition in which it is ordinarily sold in the wholesale market fall within "inputs" for MODVAT purposes under Rule 57A.

---