Packing material eligibility for Modvat credit upheld where hanging cards formed part of the product's assessable value.

Hanging cards used to hold and pack blade sets were treated as packing material, not advertising material, because their primary function was to support the packaged product and their cost formed part of the assessable value of the final product. The presence of printed matter or a display function did not, by itself, defeat Modvat eligibility. Since Rule 57B allowed credit on packing material whose cost was included in the product value, Modvat credit was admissible and could not be denied merely because the cards also carried designs or were visible in retail display.

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Issues: Whether hanging cards used for displaying and packing blades were packing materials eligible for Modvat credit when their cost was included in the assessable value of the final product.

Analysis: The cards were used to hold and clear the blade packs and the fact that they carried printed designs or could be displayed in shops did not by itself convert them into advertising material. Rule 57B permitted credit on packing material where its cost formed part of the value of the final product, and there was no dispute that the cost of the hanging cards was included in the assessable value of the blades. The earlier decision relied on by the Revenue was treated as distinguishable because it was not decided in the context of Modvat entitlement under the relevant provisions.

Conclusion: Hanging cards were held to be packing material and not advertising material, and Modvat credit was admissible to the assessee.

Ratio Decidendi: Where an item functions as packing material and its cost is included in the assessable value of the final product, Modvat credit cannot be denied merely because the packing also carries printed matter or serves a display function.

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