Modvat credit for packaging inputs may arise where statutory packaging rules make compliant packing essential for marketability.

Modvat credit under Rule 57A read with Rule 57G may extend to inputs used in packaging, such as printing ink, HR media, Ethyl/Butyl Acetate, Wax Cello Solve and poly granules, where their use has a sufficient nexus with manufacture and marketing of biscuits. The statutory packaging requirements under the Prevention of Food Adulteration Rules, 1955 and the Standards of Weights and Measures Act, 1976 indicated that compliant packaging was necessary for marketability. Prior decisions recognising credit for essential printing and packaging inputs supported the assessee's position, and the exclusion of such credit was treated as raising a substantial question of law fit for reference.

---

---

Issues: Whether a question of law arose for reference on the availability of Modvat credit under Rule 57A read with Rule 57G of the Central Excise Rules, 1944 on inputs such as printing ink, HR media, Ethyl/Butyl Acetate, Wax Cello Solve and poly granules used in packaging material for biscuits.

Analysis: The availability of credit depended on whether the disputed inputs had a sufficient nexus with the manufacture and marketing of the final product. The statutory packaging requirements under the Prevention of Food Adulteration Rules, 1955 and the Standards of Weights and Measures Act, 1976 showed that the goods could not be marketed without compliant packaging. Earlier decisions had recognised credit on inputs used for printing and packaging where such use was necessary to make the excisable goods marketable, and the Tribunal had not adequately dealt with the supporting High Court authority relied upon. In that background, the matter raised an important question of law fit for reference.

Conclusion: A referable question of law existed, and the reference to the High Court was warranted in favour of the assessee.

Ratio Decidendi: Where inputs used in packaging are necessary to comply with statutory packaging requirements and to make the final product marketable, their exclusion from Modvat credit may give rise to a substantial question of law fit for reference.

---