Broad interpretation of packaging materials supports Modvat credit for board used to make cartons for finished goods packing.

Duplex Board used to make cartons for packing torches was treated as eligible for Modvat credit under Rule 57A. The expression "packaging materials" was read broadly and was not limited to ready-to-use containers; materials used to manufacture cartons were covered where they were integrally connected with packing of the finished goods. Packing was also treated as an ancillary part of manufacture, so the use of Duplex Board qualified as use in relation to manufacture. On that basis, the duty demand and connected penalty could not survive, and credit was admissible to the assessee.

---

---

Issues: Whether Duplex Board used for making cartons for packing torches was eligible for Modvat credit as an input or packaging material under Rule 57A of the Central Excise Rules, 1944.

Analysis: Duplex Board was used to make cartons which were then used for packing the final product. The expression "packaging materials" in Rule 57A is not confined to ready-to-use containers alone, and materials used to make such cartons are covered where they are integrally connected with packing of the manufactured goods. The use of the material in making cartons was also treated as use in relation to manufacture, since packing is an ancillary part of the manufacturing process. On this basis, the demand of duty and the connected penalty could not survive.

Conclusion: The issue was decided in favour of the assessee and Modvat credit was held admissible on Duplex Board.

---