MODVAT credit for packing material was allowed where aluminium foil was only printed and returned for final packing.

Plain aluminium foil used for packing tablets and capsules remained an eligible MODVAT input when sent out only for printing and returned for packing, because printing did not create a different commercial product and the material continued to function as packing material for the final goods. Materials used in relation to manufacture up to the stage of being fit for marketing were treated as inputs for MODVAT purposes. The appellant was therefore entitled to MODVAT credit and the benefit of Rule 57F(2), and the adverse order was set aside on the question of eligibility for credit on the packing material input.

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Issues: Whether plain aluminium foil received for packing tablets and capsules and sent out for printing under Rule 57F(2) was eligible for MODVAT credit as packing material input.

Analysis: The aluminium foil was treated as the same packing material both before and after printing, and its use remained confined to packing the final products. The material was not shown to fall within any excluded category, and there was no basis to treat printing as creating a different commercial product. The conclusion was supported by the view that materials used in relation to the manufacture of finished goods, up to the stage of being rendered fit for marketing, qualify as inputs for MODVAT purposes.

Conclusion: The appellant was entitled to MODVAT credit and the benefit of Rule 57F(2) in respect of the inputs in question.

Final Conclusion: The impugned order was set aside and the appeals succeeded on the issue of eligibility to MODVAT credit on the packing material input.

Ratio Decidendi: Packing material remains an eligible input for MODVAT credit when it is used in relation to the manufacture and marketing of the final product, even if it is sent out for limited printing and returned for use in packing.

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