1994 (9) TMI 146 - AT - Central Excise

Summary

Issues:

- Modvat credit denial on various materials used in the manufacture of packing material for biscuits.
- Interpretation of eligibility for modvat credit on inputs like ink, wax, etc., used in the production of packing material.
- Comparison of previous judgments regarding modvat eligibility for different materials.
- Determination of modvat availability for specific materials in Appeal No. E/166/91-NRB and E/4304/91-NRB.

Analysis:

In the present case, the appellants were denied modvat credit on base paper, printing ink, and other materials used in the production of packing material for biscuits. The denial of modvat credit was challenged before the Tribunal through two appeals, which were consolidated for a common order. The key contention raised by the appellant's advocate was that modvat eligibility for such inputs has been recognized in various precedents, including cases like Britannia Industries Ltd., East End Paper Industries Ltd., Parle Products Ltd., Ponds India Ltd., and Multilayer Composites Pvt. Ltd. The advocate argued that modvat was allowed in cases involving printed plastic films and printing ink, emphasizing the relevance of these precedents to the current dispute.

On the other hand, the Joint CDR representing the Revenue acknowledged that packing material itself was eligible for modvat credit. However, he contended that the credit should only be extended to the packing material and not to inputs like ink and wax used in its manufacture. Referring to the Parle Products case, the Revenue argued that inks were not considered entitled to modvat credit for packaging material. The Tribunal carefully considered the arguments from both sides and analyzed the precedents cited, particularly the Parle Products case, which distinguished between packaging material and inputs like printing ink and chemicals used for lamination.

The Tribunal's analysis focused on the distinction between materials directly constituting the packaging material and those used in the manufacturing process but not integral to the final product. Drawing from previous judgments, the Tribunal emphasized that modvat benefits were applicable only to packaging material itself and not to ancillary inputs like ink and wax. The Tribunal differentiated the present case from the Multilayer Composites Pvt. Ltd. precedent, where modvat was allowed for printing ink used in the manufacture of plastic film, as the final product was the printed plastic film. In contrast, in the current matter, the ink and other materials were used as inputs for packaging material and not for the final product, leading to the conclusion that modvat was only available for specific materials like TDL Poster Paper and Glassine paper in Appeal No. E/166/91-NRB.

Regarding Appeal No. E/4304/91-NRB, the Tribunal ruled that modvat would only be available for TDL Poster paper, OBL (Glassine) paper, gum tape, and self-adhesive tape as per the relevant declaration, excluding materials like printing ink. Consequently, the Tribunal partly allowed both appeals to the extent indicated, clarifying the scope of modvat credit eligibility for the materials involved in the manufacture of packing material.