Modvat credit on inputs used through intermediate goods remains available where they are used in manufacture of the final product.

Modvat credit was admissible on duty-paid plastic granules used to make blow-moulded tubes and lay flat tubings that were then used in manufacturing slurry explosives. Rule 57A was applied broadly: credit extends to goods used in or in relation to the manufacture of final products, and the inclusive reference to packaging materials did not narrow that rule to packaging goods alone. The fact that the granules were first converted into intermediate goods, or that those intermediates may have been exempt, did not defeat eligibility. Rule 57D and the job-work arrangement also supported the claim, so the departmental challenge failed.

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Issues: Whether Modvat credit was admissible on duty-paid plastic granules used to manufacture blow-moulded tubes and lay flat tubings, which were then used in the manufacture of slurry explosives, and whether the intermediate stage or the packaging-material description barred credit.

Analysis: The scheme of Rule 57A allows credit of duty on goods used in or in relation to the manufacture of final products. The expression "input" in the Explanation is of enlarged scope and the specific inclusion of packaging materials does not narrow the main rule so as to confine credit only to packaging materials themselves. The plastic granules were used to manufacture the tubes and tubings, and those products were in turn used in the manufacture of the final explosives. The fact that the intermediate goods may be exempt or that they form part of the end product did not defeat the credit, and the situation was also covered by Rule 57D. The permission for job-work and the notification relied upon supported the respondents' position.

Conclusion: Modvat credit was admissible to the respondents, and the Department's challenge failed.

Ratio Decidendi: Under Rule 57A, credit is available on goods used in or in relation to the manufacture of the final product, and the inclusive reference to packaging materials does not exclude credit on inputs merely because they are first used to make intermediate goods.

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