MODVAT credit allowed on tin sheets used for packing containers, with containers treated as intermediate products in manufacture.

MODVAT credit on tin plates and sheets used to manufacture metal containers for packing vanaspati was held admissible because the containers formed a distinct stage in the manufacturing process and qualified as intermediate products under Rule 57D. Packing was treated as incidental or ancillary to manufacture under Section 2(f), and the fact that the containers were exempt when made without power did not exclude them from the MODVAT scheme. The absence of a chapter note comparable to Chapter 33 was not treated as material, since vanaspati could not be marketed without packing. The Revenue's reference was rejected.

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Issues: Whether MODVAT credit was admissible on tin plates/sheets used to manufacture metal containers for packing vanaspati, and whether such containers could be treated as intermediate products under Rule 57D.

Analysis: The credit claim was upheld because the tin sheets were first converted into metal containers within the manufacturing process and those containers were used for packing the final product. The fact that the containers were exempted when manufactured without aid of power did not take them outside the MODVAT scheme where they formed a distinct stage in the production line. The interpretation of "intermediate product" was linked to the stages of manufacture in the factory, and packing was treated as a process incidental or ancillary to the completion of manufacture under Section 2(f). The absence of a chapter note similar to Chapter 33 did not create a material distinction, since vanaspati could not be marketed without packing.

Conclusion: MODVAT credit was admissible and the metal containers were to be treated as intermediate products; the Revenue's reference was rejected.

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