1994 (3) TMI 243 - AT - Central Excise

Summary

Issues:
Extension of MODVAT Credit for paints used on wooden drums for marking wires and cables before delivery to customers at factory gate. Interpretation of Rule 51 of Central Excise Rules regarding markings on goods before delivery outside the factory.

Analysis:
The judgment by the Appellate Tribunal CEGAT, Bombay pertains to a Reference Application brought by the Revenue challenging the allowance of MODVAT Credit in three appeals related to the use of paints on wooden drums for marking wires and cables before delivery to customers. The Tribunal held that the paints used on the drums could be considered as used in or in relation to the manufacture of the final product, i.e., wires and cables, as per the terms of the contract with the customers. The Tribunal emphasized that the markings on the drums were essential as the particulars and specifications could not be marked directly on the final product. The Tribunal also noted that Rule 51 of the Central Excise Rules mandates markings on excisable products before delivery outside the factory, further supporting the allowance of MODVAT Credit in this case.

The main issue raised in the judgment was whether the Tribunal was correct in allowing MODVAT benefit for paints used on wooden drums, which are packing materials, and not directly on the wires and cables, in light of a previous decision involving M/s. Parle Products. The Revenue argued for a reference to the High Court based on the inconsistency with the Parle Products case. However, the Tribunal explained that the decision in Parle Products was based on an earlier understanding that packaging materials should be identifiable as such, a view later negated by the Madras High Court. The Madras High Court's decision clarified that materials used to make packaging materials, such as jars or containers, are eligible for MODVAT Credit. Therefore, the Tribunal concluded that a reference to the High Court was unnecessary as the law was settled by the Madras High Court's decision.

Regarding the relaxation granted under Rule 51 for wires and cables, the Tribunal emphasized that marking on excisable products on outer packings is a statutory requirement, regardless of any relaxation. The Tribunal highlighted that the customers' specific demand for markings on the drums further justified the necessity of compliance with Rule 51. Consequently, the Tribunal dismissed the Reference Application, affirming the allowance of MODVAT Credit for paints used on wooden drums for marking wires and cables before delivery to customers at the factory gate.