Modvat credit on manufacturing inputs and used glass bottles was treated as admissible under the rule's disjunctive conditions.

Modvat credit was treated as admissible on caustic soda, activated carbon, filter aid and filter paper used in manufacturing aerated waters because the materials were shown to form part of the production process and credit could not be denied on a narrow view of their role. Credit was also treated as admissible on old and used glass bottles, both in factory stock and with dealers, because Rule 57H was read as containing two disjunctive qualifying conditions and not as limiting credit to fresh containers. The governing principle stated is that a rule cannot be restricted by adding requirements not found in its text, and used containers may qualify if they satisfy the substantive conditions.

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Issues: (i) Whether Modvat credit was admissible on caustic soda, activated carbon, filter aid and filter paper used in the manufacture of aerated waters; and (ii) whether Modvat credit was admissible on old and used glass bottles lying in stock in the factory or with dealers.

Issue (i): Whether Modvat credit was admissible on caustic soda, activated carbon, filter aid and filter paper used in the manufacture of aerated waters.

Analysis: The inputs were held to be eligible in view of the settled position of law and the Tribunal's own earlier decisions cited by the assessee. Once the materials were shown to be used in the manufacturing process, the credit could not be denied merely on a narrow view of their role in production.

Conclusion: Modvat credit was admissible on caustic soda, activated carbon, filter aid and filter paper.

Issue (ii): Whether Modvat credit was admissible on old and used glass bottles lying in stock in the factory or with dealers.

Analysis: Rule 57H was treated as containing two independent qualifying conditions joined disjunctively. Nothing in the rule restricted credit to fresh and unused bottles only. Old and used bottles lying in stock in the factory fell within the first condition, and bottles owned by the assessee and lying with dealers for return and reuse were treated as covered by the second condition when used in the manufacture of final products cleared on or after the relevant date. The assessee was therefore not ineligible merely because the bottles were used containers.

Conclusion: Modvat credit was admissible on old and used bottles lying in the factory and on used bottles lying with dealers.

Final Conclusion: The denial of Modvat credit was unsustainable, and the assessee was entitled to the credit claimed on both the disputed inputs and the glass bottles.

Ratio Decidendi: Where the governing rule uses disjunctive qualifying conditions, credit cannot be refused by adding a restriction not found in the rule, and used containers may qualify as inputs if they satisfy the rule's substantive conditions.

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