2003 (8) TMI 394 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit on duty paid for woven sacks of high density poly ethylene used as secondary packing.
2. Interpretation of Rule 57A regarding exclusion of bags or sacks made from plastic strips.
3. Dispute over denial of credit and penalty based on the inclusion of packing cost in the assessable value of finished goods.

Analysis:
1. The appellant received three notices proposing denial of Modvat credit for using high density poly ethylene sacks as secondary packing for leather cloth. The Commissioner denied the credit, stating that since the packing was not essential, the duty paid was not admissible under Rule 57B(2)(iii). The Commissioner found that the cost of packing was not included in the assessable value of the finished goods, leading to the imposition of a penalty. The appellant contested the denial of credit and penalty, arguing that the rules did not differentiate between types of packing and only referred to packaging material.

2. The departmental representative cited Rule 57A, which excludes bags or sacks made from fabrics woven from plastic strips. However, the notices did not mention the exclusion based on the cost of packing not being included in the value of the final product. The appellant argued that the denial of credit based on the packing cost not being included in the assessable value constituted a new case. The explanation under Rule 57A(1) does not distinguish between types of packing, and the appellant contended that the denial was unjustified.

3. The appellant maintained that the denial of credit was not justified as the rules did not specify a distinction between secondary packing and other types of packing. The invoices presented by the appellant showed consistent pricing for the goods, indicating that the packing was not a separate cost. The Tribunal agreed with the appellant, finding that the denial of credit based on the necessity of packing was unfounded. The appeal was allowed, except for the amount of Rs. 29,015, and the impugned order was set aside.

This detailed analysis highlights the issues of denial of Modvat credit, interpretation of Rule 57A, and the dispute over the inclusion of packing cost in the assessable value of finished goods, providing a comprehensive overview of the judgment.