Modvat credit for packing materials depends on whether they fall within the Rule 57-A exclusions.

Packing materials used for biscuits may qualify as "inputs" for Modvat credit under Rule 57-A of the Central Excise Rules, 1944, because packaging materials fall within the Explanation to the rule unless excluded by clauses (ii) and (iii). The departmental rejection was unsustainable where no reasons were given for treating M.G. poster paper and Glassien paper as outside the definition of inputs. Verification was required only to determine whether the packing materials fell within the stated exclusions. The rejection of Modvat credit was set aside and the matter remanded; if the materials were not excluded, credit and consequential relief would follow.

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Issues: Whether packing materials used for biscuits could be treated as inputs eligible for Modvat credit under Rule 57-A of the Central Excise Rules, 1944, and whether the departmental order rejecting the claim without reasons could be sustained.

Analysis: On a prima facie reading of Rule 57-A, packaging materials fall within the expression "inputs" under clause (b) of the Explanation, subject to the exclusions in clauses (ii) and (iii). The impugned order gave no reasons for holding that M.G. poster paper and Glassien paper were outside the definition of inputs. The matter therefore required verification as to whether the packing material was covered by the stated exclusions.

Conclusion: The rejection of Modvat credit was set aside and the matter was remanded for verification. If the packing material was not covered by clauses (ii) and (iii) of the exclusion clause, the appellants were entitled to Modvat credit with consequential relief.

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