Pro rata inclusion of packaging cost supports Modvat credit eligibility for duty paid glass bottles used in aerated water.

Modvat credit was admissible on duty paid glass bottles used as containers for aerated water because Rule 57A excluded packaging materials only where their cost was not included in the assessable value of the final product. The record showed that the proportionate cost of the bottles had been included in the assessable value, and the department produced no contrary evidence. Following the Board circular and prior Tribunal rulings, full inclusion of the entire bottle value was not required; pro rata inclusion was sufficient to establish eligibility for credit.

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Issues: Whether Modvat credit was admissible on duty paid glass bottles used for aerated water where the proportionate cost of the bottles was included in the assessable value of the final product.

Analysis: Rule 57A excluded packaging materials or containers from input treatment only when their cost was not included in the assessable value of the final products. The lower authorities had found, on the basis of the record and certificates produced, that the proportionate cost of the glass bottles had been included in the assessable value of the aerated water, and no contrary evidence was produced by the department. The Board circular and prior Tribunal decisions were followed to hold that full inclusion of the bottle value was not necessary, and that pro rata inclusion of the bottle cost was sufficient for Modvat eligibility.

Conclusion: Modvat credit on the glass bottles was admissible and the Revenue's appeals failed.

Ratio Decidendi: For purposes of Rule 57A, packaging materials or containers do not stand excluded from Modvat credit if the proportionate cost of such packaging is included in the assessable value of the final product.

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