Modvat credit for rubber plugs used to seal steel tubes was upheld as they were necessary for marketability and manufacture.

Rubber plugs used on copper brazed steel tubes were treated as eligible Modvat inputs because they sealed the tube ends, preserved cleanliness, prevented contamination, and formed part of the process needed to make the goods marketable. The broad meaning of packaging material and the principle that items required for marketability can be incidental and ancillary to manufacture were applied, so the objection that the plugs were merely excluded packing material was rejected.

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Issues: Whether rubber plugs used in copper brazed steel tubes qualify as inputs or packing material for the purpose of Modvat credit under Rule 57A.

Analysis: The rubber plugs were used to seal the ends of the tubes, maintain internal cleanliness, and prevent contamination. The evidence showed that the tubes were supplied only with plugs fitted at both ends and that such fitting was relevant to making the goods marketable. The broad understanding of packaging material and the settled principle that anything required to make goods marketable forms part of manufacture were applied. The process was also treated as incidental and ancillary to manufacture within the statutory scheme governing Modvat credit.

Conclusion: The rubber plugs were held to be eligible for Modvat credit as inputs used in relation to the manufacture of the tubes, and the objection that they were merely excluded packing material was rejected.

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