1993 (11) TMI 127 - AT - Central Excise

Tribunal: Cellophane tape qualifies as packaging material for Modvat credit eligibility

HINDUSTAN LEVER LTD. Versus COLLECTOR OF C. EX., CALCUTTA-II

The Tribunal allowed the appeal, holding that cellophane tapes used for sealing cardboard boxes are considered packaging material for Modvat credit ... Modvat Credit Issues:Interpretation of the term 'packaging material' for the purpose of Modvat credit eligibility.Analysis:The case involved a dispute regarding the classification of cellophane tapes as packaging material for the purpose of Modvat credit. The appellant argued that cellophane tapes used to seal cardboard boxes containing Vanaspati pouches should be considered packaging material. The Assistant Collector and the Collector (Appeals) had ruled against the appellant, stating that cardboard boxes were only for safe transportation and not packaging material. However, the Tribunal disagreed and held that cellophane tapes used for sealing cardboard boxes are indeed packaging materials. The Tribunal cited previous decisions to support its interpretation, emphasizing that the term 'packaging material' has a broader scope than just containers and includes materials used for packaging. The Tribunal also highlighted that the final product is cleared from the factory in a marketable condition only after being packed in cardboard boxes, making the cellophane tapes a component of the final product.The appellant further cited other Tribunal decisions to strengthen their argument for Modvat credit eligibility. The Tribunal considered these references along with the arguments presented by both parties. The Tribunal emphasized that the impugned decision was based on a misunderstanding of the provisions of Rule 57A and the term 'packaging material.' It clarified that the term encompasses materials used for packaging in addition to containers. The Tribunal extensively discussed Supreme Court judgments related to the interpretation of 'in the manufacture of goods,' emphasizing that any process integral to the production of goods should be considered part of the manufacturing process. The Tribunal concluded that the cellophane tapes used for sealing cardboard boxes should be eligible for Modvat credit as they are essential components of the final product.In light of the arguments and legal precedents discussed, the Tribunal allowed the appeal and set aside the impugned order. The Tribunal's decision was based on a comprehensive analysis of the term 'packaging material' and its application to the specific case of cellophane tapes used for sealing cardboard boxes containing Vanaspati pouches. The Tribunal's ruling clarified the eligibility of such materials for Modvat credit, emphasizing their role in the packaging process and their contribution to the final product's marketability.