Modvat credit on packing material upheld where bottle and crate cost formed part of assessable value.

Modvat credit was held admissible on glass bottles and plastic crates used as packing material for aerated water because their cost was included in the assessable value of the final product. Rule 57A of the Central Excise Rules, 1944 excludes packing material only where its value is not so included. The Tribunal's factual finding on inclusion of packing cost was unrebutted, so the dispute turned on fact rather than a referable question of law under Section 35G of the Central Excise Act, 1944.

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Issues: Whether Modvat credit was admissible on glass bottles and plastic crates used as packing material for aerated water when their cost was included in the assessable value of the final product, and whether any referable question of law arose.

Analysis: Under Rule 57A of the Central Excise Rules, 1944, Modvat credit is available on specified inputs used in manufacture. The exclusion for packing material in Explanation (iii) to Rule 57A operates only where its value is not included in the assessable value. The Tribunal had found as a fact that the cost of bottles and crates was included in the assessable value of aerated water, even if on instalment basis, and that finding was not rebutted by the revenue. In that view, the controversy turned on factual determination of inclusion of packing cost rather than on a question of law referable under Section 35G of the Central Excise Act, 1944.

Conclusion: Modvat credit was admissible to the assessee on the packing material, and no referable question of law arose.

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