1991 (2) TMI 282 - AT - Central Excise

Summary

Issues:
- Disallowance of Modvat credit on duty paid HDPE granules used in the manufacture of Blow Moulded Tubes for packing Slurry Explosives.
- Interpretation of Rule 57A of the Central Excise Rules, 1944 regarding the admissibility of Modvat credit for goods used in the manufacture of final products.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Calcutta involved the disallowance of Modvat credit on HDPE granules used in the production of Blow Moulded Tubes for packing Slurry Explosives. The Collector of Central Excise (Appeals) had rejected the appeal, stating that Modvat credit on packaging material is only admissible if the material is brought in a ready-to-use condition. The appellant argued that a similar issue had been decided in a previous case and requested a similar decision be made in their case. The Departmental Representative supported the reasoning of the Collector (Appeals).

Upon review, the Tribunal found that the facts of the present case were similar to the previously decided case. The Tribunal emphasized that the main criterion for Modvat credit admissibility is whether the goods are used in or in relation to the manufacture of the final product, irrespective of whether they are considered packaging material or raw materials for packaging. The Tribunal highlighted that the Blow Moulded Tubes were integral to the Slurry Explosives and not detachable packaging material. They explained that the Tubes played a crucial role in the explosive reaction and were part of the final product. The Tribunal clarified that the HDPE granules used in manufacturing the Tubes were integral to the explosives and thus qualified for Modvat credit.

In conclusion, the Tribunal upheld the appellant's contention, allowing the appeal and setting aside the impugned order. The appellant was granted consequential benefits. The Tribunal's decision was based on the principle that any material required to make the goods marketable must be considered part of the manufacturing process, and in this case, the Blow Moulded Tubes were deemed component parts of the explosives, making the HDPE granules eligible for Modvat credit.