2001 (11) TMI 203 - AT - Central Excise

Summary

Issues:
1. Whether hanging cards are to be considered as packaging materials or advertising materials for the purpose of availing Modvat credit.
2. Interpretation of Modvat provisions in relation to the case.
3. Applicability of earlier Tribunal decision in M/s. Ajanta Print Arts case.

Analysis:

1. The issue in this case revolves around the classification of hanging cards as either packaging materials or advertising materials for the purpose of availing Modvat credit. The appellants argued that the hanging cards should be considered as packaging materials as they are used to pack small packs of blades, which are then further packed together. They contended that the cost of hanging cards is included in the assessable value of the blades, making them eligible for Modvat credit under Rule 57B. However, the Revenue argued that hanging cards are primarily used for advertising the product and not for packaging, hence, ineligible for Modvat credit.

2. The Assistant Commissioner observed that the hanging cards displayed printed designs intended for advertisement and were used to showcase the product in the shop. He relied on the Tribunal's earlier decision in M/s. Ajanta Print Arts case, where it was held that printing done with the intention to advertise the product makes the material more of an advertising material than a packaging material. The Commissioner concluded that hanging cards cannot be considered as inputs for availing Modvat credit under Rule 57A due to their advertising nature.

3. The Tribunal analyzed the situation and found that the earlier decision in M/s. Ajanta Print Arts case was not directly applicable to the present case. The Tribunal noted that the Modvat provisions under Rule 57B allow for availing credit on packing material if the cost is included in the value of the final product, which was the case with the hanging cards in question. The Tribunal emphasized that since the hanging cards were included in the assessable value of the blades and served the purpose of packaging by attracting customers' attention, they should be considered as packaging materials eligible for Modvat credit.

In conclusion, the Tribunal ruled in favor of the appellants, stating that hanging cards should be treated as packaging materials rather than advertising materials for the purpose of availing Modvat credit. The decision was based on the interpretation of Modvat provisions and the inclusion of hanging cards' cost in the final product's value, making them eligible for credit.