Modvat credit on adhesive tapes used for carton sealing was allowed as duty-paid packing material linked to assessable value.

Modvat credit was held admissible on duty-paid adhesive tapes used to seal cartons for soaps and detergents where the cartons formed part of the duty-paid packing material. Because duty had been paid on the cartons and their value was included in the assessable value of the final products, the adhesive tapes were treated as linked to the packing material rather than as an excluded secondary item. The chartered accountant's certificate also confirmed that the deduction claimed did not include the cost of the adhesive tapes. On that basis, denial of credit was unsustainable.

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Issues: Whether Modvat credit was admissible on duty-paid adhesive tapes used to seal cartons in which the manufactured soaps and detergents were packed and cleared.

Analysis: The credit was denied on the view that the cartons were only secondary packing. It was shown that duty had been paid on the cartons and their value had been included in the assessable value of the final products. The certificate of the chartered accountant also clarified that the deduction claimed did not include the cost of adhesive tapes. In these circumstances, the adhesive tapes formed part of the duty-paid packing material linked to the assessable value of the goods.

Conclusion: Modvat credit was admissible on the adhesive tapes and the denial of credit was unsustainable.

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