1996 (9) TMI 259 - AT - Central Excise

Summary

Issues: Denial of Modvat credit on broken glass bottles during bottling process.

Analysis:
The Revenue sought reference to the High Court under Section 35G of the Central Excises and Salt Act, 1944, regarding the denial of Modvat credit on glass bottles that break during the bottling of P.P. Medicines. The contention was whether such broken bottles could be considered manufacturing waste eligible for credit under Rule 57D of the Rules. Both lower authorities and the Tribunal rejected the Revenue's argument, upholding that the broken bottles were part of the manufacturing process. The Tribunal also referred to a previous decision in Collector v. Eros Pharma. The Revenue framed the question for reference, questioning if the broken glass bottles could be treated as manufacturing waste under Rule 57D. The department argued that the broken bottles should not be considered part of the manufacturing process and should not attract Rule 57D. On the other hand, the appellant contended that the manufacturing process extended up to filling the medicines in the bottles, thus Rule 57D was correctly followed.

The central issue revolved around the extent to which the manufacturing activity for P.P. Medicines could be deemed to have extended. The Tribunal noted that the production of medicaments is regulated by a specific statute requiring packing the medicines in a specific container. As the packing of medicines is a statutory obligation, the manufacturing activity is considered to extend until the medicines are packed. Therefore, the waste generated during this process falls under Rule 57D. The Tribunal highlighted that the South Regional Bench had a similar view in Re: Eros Pharma. No contrary view was presented, and no convincing grounds were raised to support an alternative perspective. Consequently, the Tribunal concluded that there was no valid reason to refer the issue to the High Court, and the application for reference was rejected.