1994 (8) TMI 160 - AT - Central Excise

Summary

Issues:
1. Whether MODVAT Credit can be availed for duty paid on tin sheets used in manufacturing metal containers for packing Vanaspati.
2. Whether metal containers used for packing Vanaspati can be considered "intermediate products" under Rule 57D of the Central Excise Rules, 1944.

Analysis:

Issue 1:
The Revenue filed a Reference Application challenging the Larger Bench's decision favoring the Respondents regarding the admissibility of MODVAT Credit for tin sheets used in making metal containers for packing Vanaspati. The Ld. SDR argued that metal containers are final products exempt from duty if manufactured without power aid. Citing a Madras High Court case involving plastic granules for cosmetics, the Ld. SDR contended that a similar provision for packing was absent in the classification of Vanaspati. Furthermore, it was asserted that metal containers cannot be deemed intermediate products under Rule 57D.

Issue 2:
Upon considering both parties' arguments, the Tribunal found that the Larger Bench's decision was based on a Madras High Court ruling involving plastic granules for cosmetics packaging. The Tribunal noted that the key issue was whether the materials, though different (plastic granules vs. tin sheets), were converted into exempted products used for packing the final goods. The Tribunal emphasized that the term "intermediate product" under the MODVAT Scheme should be interpreted based on the manufacturer's production stages. It was established that components not produced in the same line but assembled separately should still be considered intermediate products if used for final product packing. The Tribunal rejected the argument that metal containers could not be classified as intermediate products, aligning with the Madras High Court's decision.

Conclusion:
Regarding the absence of a Chapter Note similar to Chapter 33 for Vanaspati in Chapter 15, the Tribunal clarified that Vanaspati, being a consumer product, necessitates packing for marketability. It was emphasized that packing falls under the definition of processes incidental to completing Vanaspati manufacture. Consequently, the Reference Application challenging the MODVAT Credit eligibility for tin sheets used in metal container production for Vanaspati packing was dismissed as unfounded.