Modvat credit on bottles broken during manufacturing operations remains admissible; transit breakages were not the basis for disallowance.

Modvat credit was admissible on glass bottles broken during washing, cleaning, filling and capping in the manufacturing process of edible preparations, because the breakage occurred after the bottles had been put to use in the intended production operations. Breakages in transit from storage to the plant were expressly excluded as the basis of the claim. On that footing, reworking the demand by treating only transit breakages as disallowed was unnecessary and unsustainable. The Tribunal relied on the principle that inputs emerging as waste after use in manufacture remain eligible for credit where the rule so permits.

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Issues: Whether Modvat credit was admissible on glass bottles broken during the washing, cleaning, filling and capping operations in the manufacture of edible preparations, and whether any demand required re-working by excluding only breakages occurring in transit from storage to the plant.

Analysis: The bottles were stated to break at the production stage during washing, cleaning and on the conveyor belt leading to filling and capping, while breakages in transit from the storage place to the plant were expressly disowned as ineligible and not the basis of credit. On those facts, the earlier departmental assumption that the disallowance had to be reworked on the basis of transit breakages was found unnecessary. Credit on bottles broken in the course of the filling operation was treated as covered by the rule relating to input emerging as waste after being put to use in the intended manufacturing process, and the Tribunal decisions relied upon supported admissibility of credit in such circumstances.

Conclusion: Modvat credit on bottles broken during the manufacturing operations was admissible, and the direction to rework the demand was unsustainable.

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