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Issues: Whether MODVAT credit was admissible on steel barrels used to transport transformer oil sent along with transformers, on the footing that the oil was a component part of the transformer and that its value and the value of the barrels were included in the assessable value.
Analysis: The transformer oil was not filled in the transformer at the time of clearance but was merely sent along with it. The record did not show that the transformer was treated in trade as incomplete without the oil. Though coolant may be necessary for functioning, the manufacture of the transformer was complete when its electrical components were in place and it could be assembled as such. The oil therefore could not be treated as a component part of the transformer, and the barrels used to carry it could not qualify as packing material for MODVAT purposes. Inclusion of the value of the oil and barrels in assessable value under Section 4 did not control entitlement to MODVAT credit, because MODVAT operated under its own statutory scheme.
Conclusion: MODVAT credit on the barrels was not admissible and the denial of the benefit was upheld.
Ratio Decidendi: Eligibility to MODVAT credit depends on the statutory conditions governing inputs and packing materials, and not merely on inclusion of their value in the assessable value of the final product; a material sent along with the goods but not forming part of the manufactured product is not a component part for MODVAT purposes.
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