Modvat credit on broken packing bottles allowed where breakage occurred during the integrated manufacturing and packing process.

Modvat credit was admissible on glass bottles broken during bottling and packing of P.P. medicines because the manufacturing process was treated as continuing through the packing stage. Breakage occurring in that integrated process was regarded as waste arising in the course of manufacture under Rule 57D of the Central Excise Rules, so it did not justify denial of credit. The denial of credit on the broken bottles was therefore not justified.

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Issues: Whether Modvat credit was admissible on glass bottles broken during the bottling and packing of P.P. medicines as waste arising in the course of manufacture under Rule 57D of the Central Excise Rules.

Analysis: The manufacture of P.P. medicines was treated as continuing up to the stage of packing in bottles. Waste arising during that integrated manufacturing process, including breakage of bottles, was held to fall within Rule 57D. The reasoning followed the view that breakage occurring in the course of packing is not outside the manufacturing process and therefore does not justify denial of credit.

Conclusion: Modvat credit on the broken glass bottles was admissible and its denial was not justified.

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