Modvat credit on packing materials remains allowable despite MRP-based valuation of finished goods.

Duty paid on packing materials used for detergent washing powder was admissible as Modvat credit because the Modvat rules contained no exclusion for such materials and packing materials were recognised as eligible inputs. The fact that the finished goods were assessed on an MRP-minus-permissible-deduction basis did not affect credit entitlement where the input otherwise qualified under the scheme. Credit on the packing materials was therefore upheld and the Revenue's challenge failed.

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Issues: Whether duty paid on packing materials used for detergent washing powder was admissible as Modvat credit when duty on the finished goods was assessed on the basis of MRP minus permissible deduction.

Analysis: The Modvat rules contained no exclusion denying credit on duty paid packing materials. Packing materials were specifically treated as eligible inputs, and the mode of valuation of the finished product on MRP basis did not alter entitlement to credit where the input otherwise qualified under the rules.

Conclusion: Credit on duty paid packing materials was allowable. The Revenue's challenge failed.

Final Conclusion: The assessee's entitlement to Modvat credit on packing materials was upheld and the Revenue appeal was rejected.

Ratio Decidendi: Where packing materials are recognised as eligible inputs under the Modvat scheme, credit of duty paid thereon cannot be denied merely because the finished goods are assessed on MRP-based valuation.

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