Packaging material used in ancillary packing can qualify as Modvat input when needed for marketable final clearance.

Packaging material used in ancillary packing processes can qualify as an input for Modvat credit where it forms part of the manufacturing chain and is necessary to make the final product marketable. Cello tape used to seal cartons containing packed pouches was held to be used in relation to manufacture, because packaging is incidental or ancillary to completion of the manufactured product under Section 2(f), and Rule 57A includes packaging material within inputs. Credit was therefore admissible for the cello tape used in the final packing process.

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Issues: Whether cello tape used for sealing cartons containing packed pouches of the final product qualifies as an input eligible for Modvat credit.

Analysis: Rule 57A treated packaging material as an inclusive category of inputs, and the expression "inputs" extended to goods used in or in relation to the manufacture of the final product. The scope of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944 included processes incidental or ancillary to completion of the manufactured product. Packaging of the final product was such a process. The use of cello tape in sealing cartons formed part of the multi-level packing necessary for marketability and transportation of the product, and eligibility could not be confined only to the immediate packing of the product itself.

Conclusion: Cello tape was an input used in relation to the manufacture of the final product and Modvat credit was admissible.

Ratio Decidendi: Goods used as packaging or in ancillary packing processes that form part of the manufacturing chain and are necessary for the final product as cleared from the factory qualify as inputs for Modvat credit.

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