Modvat credit on inputs for packing material was allowed where the goods were used in relation to the final product.

Modvat credit under Rule 57A was held admissible on M.G. poster paper and printing ink used to make printed waxed wrapping paper, where that wrapping paper served as packing material for the final products. The reasoning accepted that Rule 57A covers not only inputs used directly in manufacture but also goods used in relation to the final product, including inputs used to produce intermediate packing material. The departmental objection that credit could not be taken because the materials were used for an intermediate packing input was rejected, and the credit claim was allowed.

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Issues: Whether Modvat credit under Rule 57A was admissible on M.G. poster paper and printing ink used in making printed waxed wrapping paper, when such wrapping paper was used as packing material for the final products.

Analysis: The dispute turned on the scope of Rule 57A, which permits credit not only for inputs used directly in the manufacture of the final product but also for goods used in relation to the final product. The packing material in question was used in the course of manufacture of the assessee's final products, and the reasoning adopted by the appellate authority was supported by the view that inputs used for producing packing material can also qualify for credit. The departmental objection that credit was unavailable because the materials were used for an intermediate packing input was not accepted.

Conclusion: Modvat credit was admissible and the departmental appeal failed.

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