1998 (5) TMI 221 - AT - Central Excise

Tribunal grants Modvat credit for paper manufacturing inputs, excludes coal & steam. Packaging material costs included.

The Tribunal allowed the appeal on the admissibility of Modvat credit for various items essential for paper manufacturing, except coal and steam. They ... Modvat - Packing material Issues:Admissibility of Modvat credit on various items including Oxygen Gas, D.A. Gas, Hessian bags, Gunny Cuttings Synthetic Cloth, Refractory bricks, Cement, and others.Analysis:The lower appellate authority considered the admissibility of Modvat credit on several items, allowing credit only on synthetic cloth as it directly affected the manufacture of final products, citing a previous Tribunal case. The appellant did not dispute the decision on coal and steam but argued that other items were essential for paper manufacturing, supported by various Tribunal judgments and the use of these items in the production process.The respondent contended that the items were not directly used in manufacturing final products and were not raw materials. Additionally, they argued that Modvat credit could not be claimed on items considered capital goods before 1994. After considering both sides, the Tribunal found that certain items like Oxygen Gas, D.A. gas, refractory bricks, Cement, and synthetic cloth were eligible for Modvat credit as they did not fall under the exclusion clause of Rule 57A. The Tribunal agreed that hessian bags, labels, gum tape, ink, and similar items were packing materials, and their cost was included in the assessable value for Central Excise duty.The Tribunal clarified that the cost of packaging materials needed to be included in the assessable value for Central Excise duty, not just for cess payment. They allowed the appeal on the admissibility of Modvat credit for all items except coal and steam, subject to verification of specific duty rates during the relevant period. The Tribunal granted the appeal for the assessees and dismissed the revenue's appeal based on the facts and circumstances presented.In conclusion, the Tribunal allowed the appeal regarding the admissibility of Modvat credit on various items essential for paper manufacturing, emphasizing the inclusion of packaging material costs in the assessable value for Central Excise duty. The decision was based on the specific usage and relevance of the items in the manufacturing process, ensuring fair treatment for the appellants.