Modvat credit eligibility for machine parts and packing material upheld where precedent and binding circular supported the claim.

Modvat credit was recognised for asbestos packing and slat used in the assessee's manufacturing activity. The asbestos packing issue had already been settled in the assessee's favour by prior Tribunal precedent, and that settled position was followed. The slat was treated as part of the cane carrier, a machine used in the sugar industry, and a binding Board circular clarified that all parts of such machinery were eligible for Modvat credit regardless of classification. A contrary classification-based view was therefore rejected, and credit was held admissible on both items.

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Issues: Whether Modvat credit was admissible on asbestos packing and slat used in relation to the assessee's manufacturing activity.

Analysis: The eligibility of asbestos packing had already been settled in favour of the assessee by a prior Tribunal decision. As regards slat, it was treated as part of the cane carrier, which is a machine used in the sugar industry, and the Board's circular clarified that all parts of such a machine are eligible for Modvat credit irrespective of classification. On this basis, the impugned contrary view could not stand.

Conclusion: Modvat credit was admissible on both asbestos packing and slat, in favour of the assessee.

Ratio Decidendi: Where an item is covered by settled Tribunal precedent or is established as a part of machinery whose parts are eligible for credit under a binding departmental clarification, Modvat credit cannot be denied on a contrary classification view.

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