Packing materials and Modvat credit: paper tubes used for winding yarn remained admissible absent proof of exclusion.

Modvat credit on paper tubes used for winding yarn was treated as admissible because packing materials fall within the definition of inputs under Rule 57A, and the exclusion applies only where Revenue shows that the cost of such material was not included in the assessable value of the final product or the preceding year. The record contained no substantiating evidence that the tubes' cost was outside the tariff value or assessable value, and presumptions were insufficient. On that basis, the credit claim succeeded and the Revenue challenge failed.

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Issues: Whether credit was admissible on paper tubes used for winding yarn, and whether the exclusion in Rule 57A displaced such credit on the facts proved by Revenue.

Analysis: Tariff value fixed under section 3(2) of the Central Excise Act, 1944 is determined by the Central Government taking all relevant factors into account, and Revenue produced no material to show that the cost of the impugned inputs was not already reflected in the tariff value. The explanation to Rule 57A includes packing materials within inputs, while the exclusion for packing material under clause (iii) applies only where the cost of such material is not included in the assessable value of the final product under section 4, or had not been so included in the preceding financial year. The record contained no substantiating evidence to invoke that exclusion, and presumptions were held insufficient.

Conclusion: Credit on the paper tubes was held admissible, and the Revenue appeal failed.

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