Modvat credit for packing machinery allowed where sealing cartons was essential to make finished goods marketable.

A hot melt unit used to seal cartons containing welding electrodes was treated as capital goods eligible for Modvat credit under Rule 57Q because packing was an integral step in making the finished goods marketable. The packing process was held to be connected with the manufacture and marketability of the product, so machinery used for that purpose qualified for credit. The Revenue's challenge failed on that basis.

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Issues: Whether Modvat credit was admissible on a hot melt unit used for sealing printed cartons in which welding electrodes were packed, as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The machine was used for packing the finished welding electrodes in cartons by sealing them at both ends. The deciding factor was that the final products could not be marketed without proper packing, and packing was treated as an integral step connected with making the goods marketable. On that basis, the machine used in the packing process was regarded as capital goods eligible for credit.

Conclusion: Modvat credit on the hot melt unit was admissible, and the Revenue's appeal failed.

Ratio Decidendi: Where a machine is used in the packing process that is essential to make the final goods marketable, it qualifies as capital goods for Modvat credit under Rule 57Q.

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