Modvat credit for durable chlorine containers allowed where container cost was amortised into the product price.

Duty on durable and returnable chlorine containers was held eligible for Modvat credit because Rule 57A denied credit only where packing material cost was not included in the assessable value of the final product. The cost of such containers may be recovered progressively through amortisation in the price of chlorine, and that commercial method still amounts to inclusion of the container cost in the sale price. Revenue could not reject amortisation merely because the entire container value was not charged at each sale, so credit was allowed and consequential relief followed.

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Issues: Whether duty paid on durable and returnable chlorine containers was eligible for Modvat credit when a portion of the container cost was recovered in the sale price of chlorine through amortization.

Analysis: Rule 57A denied credit only where the cost of packing materials was not included in the assessable value of the final product. In the case of durable containers, commercial practice is to recover the container cost progressively through the price of the contents rather than by charging the entire value in each sale. That method does not negate inclusion of the container cost in the sale price; it merely reflects the mode of recovery. Tax law must be applied consistently with normal commercial practice, and the Revenue could not reject amortization as a permissible method of inclusion of container cost in the price of chlorine.

Conclusion: The duty paid on the chlorine containers was eligible for Modvat credit, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee was granted the consequential relief flowing from the allowance.

Ratio Decidendi: Where the cost of durable packing material is recovered through amortized inclusion in the price of the final product, it is treated as included in the assessable value, and Modvat credit cannot be denied on the ground that the entire container value was not loaded at each sale.

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