Modvat credit on integral component supplied with finished goods upheld; optional tool-kit precedent distinguished.

Modvat credit was admissible on an infusion set supplied uniformly with the finished goods and sold as part of the marketed package. Because the set formed part and parcel of the cleared product, it was treated as an integral component for Modvat purposes, and credit could not be denied merely on the ground that it accompanied the goods. The tool-kit precedent was distinguished because that item was supplied only on request and was not part of the marketed product. The lower appellate order granting credit was sustained and the Revenue's challenge failed.

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Issues: Whether Modvat credit was admissible on the infusion set supplied along with the finished goods.

Analysis: The infusion set was supplied in every case along with the finished product and was sold as part of the package value. On those facts, it formed part and parcel of the goods cleared for sale and was treated as a component of the final product. The precedent relating to tool kits was distinguished because that item was supplied only on request and did not form part of the goods marketed as such. The authority therefore accepted the reasoning that credit could not be denied merely because the item was supplied along with the finished goods, where it functioned as an integral part of the marketed product.

Conclusion: Modvat credit on the infusion set was held admissible and the Revenue's appeal failed.

Final Conclusion: The order of the lower appellate authority granting credit was sustained, resulting in rejection of the Revenue's challenge.

Ratio Decidendi: Where an item is supplied uniformly along with the finished product and forms part of the package sold in the market, it can qualify as an admissible input/component for Modvat purposes, and a distinguishable case concerning optional supply of tools does not bar credit.

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