Modvat credit denied where P.V.C. tubing only attached a promotional free supply to an already marketable product.

P.V.C. tubing used only to attach a promotional free steel bowl to bottles meant for export was not an input used in or in relation to manufacture under Rule 57A. The bottled product was already complete and marketable without the bowl, so the tubing could not be treated as packing material or as material necessary to render the goods marketable. Modvat credit was therefore not available, and the appeal failed.

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Issues: Whether P.V.C. tubing used to affix a free supply steel bowl to Horlicks bottles meant only for export qualified as an eligible input for Modvat credit under Rule 57A of the Central Excise Rules.

Analysis: The bottled product was complete and marketable without the steel bowl, and the bowl was attached only for export sales as a promotional free supply. The P.V.C. tubing was therefore not used in or in relation to the manufacture of the finished product, nor could it be treated as packing material. The authorities relied on the correct principle that only material required to render the goods marketable can form part of manufacture, and the cases cited by the assessee were distinguishable because they involved packing essential to the cleared product itself.

Conclusion: The P.V.C. tubing was not eligible for Modvat credit, and the appeal failed.

Ratio Decidendi: Material used only to attach a promotional free supply to a product already complete and marketable does not constitute an input used in or in relation to manufacture for Modvat purposes.

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