Modvat credit for inputs used in packaging material upheld under Rule 57A, with departmental clarification unable to override settled law.

Modvat credit under Rule 57A of the Central Excise Rules was considered admissible for inputs used in manufacturing packaging material for the final product. The analysis applied the settled legal position that departmental clarification cannot override the governing rule, and it noted that the authorities relied on by the Revenue had already been considered without changing that position. On that basis, credit on inputs for packaging material was sustained and the Revenue's challenge was rejected.

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Issues: Whether Modvat credit was admissible on inputs used in the manufacture of packaging material for the final product.

Analysis: The dispute turned on the scope of Rule 57A of the Central Excise Rules in relation to credit on packaging material and on materials used to make such packaging material. The order under challenge followed the settled view of the High Court and the Tribunal that the departmental clarification could not override the legal position, and the cited authorities on which the Revenue relied had already been considered and not accepted as changing that position.

Conclusion: Modvat credit was held admissible and the Revenue's challenge failed.

Final Conclusion: The appeal was rejected and the assessee's entitlement to credit was sustained.

Ratio Decidendi: Credit under Rule 57A cannot be denied merely because the inputs are used in the manufacture of packaging material for the final product, where the settled legal position supports admissibility.

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