Modvat credit on battery polyliners denied where the items were treated as ineligible packaging materials

Polyliners placed inside cartons to protect batteries from oxidation and moisture during storage and transport were examined as possible inputs under Rule 57A. The text states that articles used as a technical necessity for bringing the final product into the market stream can be treated as used in or in relation to manufacture, but that principle was not accepted for these polyliners as packaging materials. They were held not eligible for Modvat credit, and the appeal failed.

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Issues: Whether polyliners used inside cartons for packing batteries qualify as packaging materials eligible for Modvat credit under Rule 57A.

Analysis: The polyliners were used inside cartons to prevent oxidation of batteries and to provide moisture resistance during storage and transport. This use was accepted as a technical necessity for moving the goods into the market stream. Articles used as a technical necessity in the course of bringing the final product to market are treated as used in or in relation to manufacture. On that basis, the claim that the polyliners were merely raw material for packing material and not eligible inputs was not accepted.

Conclusion: The polyliners were not eligible for Modvat credit as packaging materials, and the appeal failed.

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