Packing material integral to manufacture qualifies for Modvat credit when used for cartons carrying the final product.

Modvat credit was held admissible on duplex board used to make printed cartons for packing torches and miniature bulbs, because packing material used in relation to manufacture and marketing forms part of the manufacturing process. The Tribunal treated packing as incidental or ancillary to completion of the final product and regarded containers used for packing as part of that product for credit purposes. On that reasoning, denial of credit was unsustainable and the order was set aside.

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Issues: Whether Modvat credit was admissible on duplex board used for making printed cartons meant for packing torches and miniature bulbs, when the cartons were treated as a separate exempted product.

Analysis: The Tribunal followed its earlier decision on identical facts and the High Court ruling that packing material used in relation to the manufacture and marketing of the final product forms part of the manufacturing process. The Tribunal noted that packing is incidental or ancillary to completion of the manufactured product and that containers used for packing a final product are to be treated as a component part of that product for credit purposes.

Conclusion: Modvat credit on the duplex board was admissible and the denial of credit was unsustainable.

Final Conclusion: The appeal succeeded and the order denying Modvat credit was set aside.

Ratio Decidendi: Material used for packing the final product, where packing is integral to completion and marketing of the product, is eligible for Modvat credit as part of the manufacturing process.

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