1996 (1) TMI 200 - AT - Central Excise

Summary

Issues:
1. Eligibility of Polyliners for MODVAT Credit as packing material.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras, involved a dispute regarding the eligibility of Polyliners used in cartons for packing batteries for MODVAT Credit. The Collector of C. Excise (Appeals), Hyderabad, had allowed the appellant's plea, stating that the Polyliners were eligible for the benefit of MODVAT Credit. The lower authority held that the Polyliners, being essential packing material to prevent oxidization of batteries, were eligible for MODVAT Credit. The Tribunal referred to previous judgments and concluded that if the material was clearly identifiable as packing material and brought only for packing purposes, it qualified for MODVAT Credit. The Collector contended that Polyliners were not clearly recognizable as packing materials and were inputs for packaging materials, citing a previous CEGAT judgment. The end use of Polyliners, according to the Collector, was to impart certain qualities to cartons, making them inputs for cartons rather than packaging materials.

The Tribunal considered both parties' arguments and observed that the Collector did not dispute the use of Polyliners to prevent de-oxidation of batteries, which was deemed a technical necessity during transport and storage to prepare goods for the market stream. Citing precedents, the Tribunal noted that if an article's use was a technical necessity until the goods entered the market stream, it was considered part of or related to the final product's manufacture. Therefore, the Tribunal dismissed the appeal, holding that the use of Polyliners as a technical necessity for preparing goods for the market stream did not qualify for MODVAT Credit as packaging material. The Tribunal's decision was based on the principle that the use of an article as a technical necessity until the goods entered the market stream was integral to the final product's manufacture, thereby denying the appellant's claim for MODVAT Credit on Polyliners used as packing material for batteries.