Modvat credit on PVC film allowed where the material was technically necessary for manufacture and marketability of goods.

PVC film used in the manufacture of cushion compound and for covering tread rubber as packing material was treated as eligible for Modvat credit because its use was a technical necessity and it protected the goods from dust while placing them in the marketable stream. Materials required to render goods marketable, or used for such necessary protection in the course of manufacture, fall within the Modvat credit principle. Credit on the PVC film was therefore admissible, and the Revenue's objection was rejected.

---

---

Issues: Whether Modvat credit was admissible on PVC film used during manufacture of cushion compound and for covering tread rubber as a packing material necessary for protection and marketability.

Analysis: The PVC film was found to be used in the course of manufacture of cushion compound and also as packing material for tread rubber. Its use was treated as a technical necessity and as material required to protect the products from dust and to place them in the marketable stream. On that reasoning, the case fell within the principle that materials used to render goods marketable and required by technical necessity qualify for Modvat credit.

Conclusion: Modvat credit on the PVC film was held admissible, and the Revenue's challenge was rejected.

---