Modvat credit on returnable plastic crates allowed where crates functioned as essential packaging for bottled aerated waters.

Plastic crates used for aerated waters were treated as inputs used in relation to manufacture because they formed part of the packaging and movement of bottled product from receipt of empty bottles through filling, storage, handling and wholesale clearance. Their durable and returnable character did not disqualify them on these facts, and the objection based on non-inclusion of their value in assessable value was considered irrelevant where the product was under specific duty during the relevant period. On that reasoning, Modvat credit on the crates was held admissible.

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Issues: Whether Modvat credit of duty paid on plastic crates used for aerated waters was admissible as an input used in or in relation to the manufacture and marketing of the final product.

Analysis: Plastic crates were found to be associated with the process from the stage of receipt of empty bottles through filling, storage, handling and clearance in wholesale trade. The crates functioned as packaging material for aerated waters in bottles and not merely as a handling accessory. The fact that the crates were durable and returnable did not disqualify them in the facts of the case, and the plea based on non-inclusion of their value in assessable value was held irrelevant because the product was under specific duty during the relevant period. The reasoning accepted the broader conception of packaging materials and inputs under Modvat principles.

Conclusion: Modvat credit on the plastic crates was admissible and was rightly allowed; the assessee succeeded on the issue.

Ratio Decidendi: Where a crate serves as essential packaging for the manufacture, storage, handling and wholesale marketing of the excisable product, it constitutes an input in relation to manufacture and is eligible for Modvat credit.

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