1996 (5) TMI 262 - AT - Central Excise

Issues Involved:
1. Whether Modvat credit of duty paid on plastic crates is admissible when used in the manufacture and marketing of 'aerated waters'.

Issue-wise Detailed Analysis:

1. Admissibility of Modvat Credit on Plastic Crates:

Background and Department's Allegations:
The respondents, manufacturers of 'aerated waters', declared plastic crates as an input under Rule 57G to avail Modvat credit. The department issued a show cause notice on 24-12-1992, questioning the credit of Rs. 1,072.50 taken on 100 plastic crates. The department argued that plastic crates are not inputs for manufacturing 'aerated waters' as the manufacturing process is complete once the bottles are filled and sealed. The crates are used only for handling and transportation, thus not qualifying as inputs in the manufacturing process.

Respondents' Defense:
The respondents contended that crates are essential for the integrated automatic process of handling glass bottles during washing, filling, and final inspection. They argued that crates are necessary for marketing as the bottles are sold in crates, making them an essential packaging material. They cited Supreme Court decisions in *Collector v. Eastend Paper Limited* and *Collector v. Jay Engineering Works* to support their claim that crates are inputs in relation to the manufacture of excisable goods.

Assistant Collector's Decision:
The Assistant Collector ruled in favor of the respondents, allowing Modvat credit on plastic crates. He relied on Supreme Court judgments and a Board's letter dated 23-6-1988, which allowed Modvat credit on glass bottles, and a Trade Notice dated 8-8-1990 permitting credit on gases used for safe transportation.

Collector of Central Excise (Appeals) Decision:
The department's appeal under Section 35E was dismissed by the Collector of Central Excise (Appeals), Calcutta, leading to the current appeal before the Tribunal.

Revenue's Argument:
The Revenue reiterated that plastic crates are handling devices, not packaging materials, as they are durable, returnable, and not sold with the aerated waters. The value of crates is not included in the price of aerated waters for excise duty purposes.

Respondents' Rebuttal:
The respondents argued that crates are essential for the marketability of aerated waters in bottles and should be considered inputs. They cited the Supreme Court's judgment in *G. Claridge and Co. Ltd. v. Collector of Central Excise* and a CBEC Circular dated 13-9-1995, which clarified that Modvat credit on crates used by manufacturers of 'aerated waters' is allowable.

Tribunal's Analysis:
The Tribunal considered whether Modvat credit on plastic crates is admissible. It noted that the crates are used throughout the manufacturing process and in marketing aerated waters in wholesale trade. The Tribunal found no evidence from the Revenue to contradict the lower authorities' findings that crates are inputs used in the manufacture of aerated waters.

Legal Precedents and Definitions:
The Tribunal referenced the Supreme Court's interpretation of 'containers' in *G. Claridge and Co. Ltd.*, which defined containers broadly to include receptacles used for storage and transportation. The Tribunal concluded that plastic crates qualify as packaging materials under Rule 57A, which includes all types of containers without lids.

Durable and Returnable Nature:
The Tribunal dismissed the Revenue's argument about the durable and returnable nature of crates, noting that this would only be relevant if aerated waters were subject to ad valorem duty, which was not the case before 1-3-1994.

CBEC Circular:
The Tribunal acknowledged the respondents' reliance on the CBEC Circular but clarified that it was relevant only after the duty structure change to ad valorem from 1-3-1994.

Conclusion:
The Tribunal upheld the lower authorities' decision, affirming that Modvat credit on plastic crates was rightly taken by the respondents. The Revenue's appeal was dismissed.

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