2009 (6) TMI 11 - HC - Central Excise

Cenvat / Modvat Use in or in relation to manufacture - Manufacture filed declaration under Modvat Scheme declaring the plastic dropper supplied with the bottle containing drops as an input used in or in relation to manufacture of final product namely Novamox product (Pediatric drops). However, the department objected this on the grounds that this droppers are separately kept in the cartons sealed bottle of the Pediatric drop. These droppers are neither used in the manufacture of pediatric drop nor used in relation to the manufacture of the final product HC uphold the view of tribunal in which tribunal held the plastic dropper packed in the pediatric drops and marketed at the factory gate in the condition could be construed to be an input used in or in relation to the manufacture of the final product as laid down in Rule 57A of the Central Excise Rules credit is allowable.

Summary

Issues:
1. Whether plastic droppers supplied with pediatric drops can be considered as inputs used in or in relation to the manufacture of the final product under Rule 57A of the Central Excise Rules, 1944?

Analysis:
The case involved a dispute regarding the admissibility of MODVAT credit on plastic droppers supplied with pediatric drops by a pharmaceutical company. The Revenue contended that the droppers were not used in the manufacture or in relation to the manufacture of the drops, as they were merely placed in the cartons along with the sealed bottles. The company argued that the droppers were essential for proper dispensation of the drug as per the directions of the Drug Controller of India. The company claimed that the droppers formed part of the manufactured product and were necessary for marketing the pharmaceutical product to consumers.

The tribunal framed a question based on the interpretation of relevant decisions and the concept of value addition under the MODVAT scheme. The company demonstrated that the droppers were necessary for administering the drug in the prescribed quantity as per medical advice. They highlighted the advisory from the Drug Controller of India emphasizing the need for suitable dispensing measures with oral liquid pediatric preparations. The company's position was supported by Note 5 to Chapter 30 of the Central Excise Tariff, which considers the adoption of any treatment to render a product marketable as 'manufacture.'

The court referred to previous judgments where essential components for marketing a product were considered as inputs eligible for duty credit. They cited examples where items like nameplates for fans and wrapping paper for products were deemed essential for marketing and thus eligible for credit. The court differentiated a previous case regarding tool kits, emphasizing the essential nature of the droppers for proper administration of the medicine as prescribed.

In conclusion, the court upheld the tribunal's decision, stating that the plastic droppers packed with the pediatric drops and marketed together could be construed as inputs used in or in relation to the manufacture of the final product under Rule 57A of the Central Excise Rules. The court considered the essential nature of the droppers for proper dispensation of the drug and their role in making the final product marketable to consumers.

This comprehensive analysis of the judgment highlights the key arguments, legal interpretations, and precedents considered in resolving the issue related to the admissibility of MODVAT credit on plastic droppers supplied with pediatric drops.