1997 (12) TMI 199 - AT - Central Excise

Summary

Issues:
Challenge to Order-in-Original regarding Modvat credit on packing materials and containers.

Analysis:
The case involves a challenge to Order-in-Original No. 39/D/91, which raised concerns about the appellant's availing of Modvat credit on the cost of metal containers and exemption Notification 34/83. The appellant, engaged in fruit juice manufacturing, used non-durable containers for packaging. The dispute centered on whether the cost of packing materials was included in the assessable value of the final product. The department alleged unauthorized Modvat credit availed by the appellant and issued a show cause notice. The Additional Collector upheld the demand, leading to the appeal.

The notification in question, No. 34/83, was effective until 30-6-1986, providing partial exemption on excise duty for fruit juice packed in metal containers. The appellant acknowledged availing this benefit until the specified date. However, the department's contention that the benefit was availed post-30-6-1986 was dismissed.

The interpretation of Rule 57A of the Central Excise Rules was crucial in this case. The rule allows credit for excise duty paid on specified inputs used in manufacturing final products. The exclusive definition under the rule excludes packaging materials if their cost was not included in the assessable value of the final product in the preceding financial year. The department argued that the containers used by the appellant fell under this exclusion due to the exemption notification. However, the tribunal found that the cost of metal containers was indeed included in the assessable value, as evidenced by the wholesale price lists, thus not meeting the criteria for exclusion under Clause (iii).

Furthermore, exclusion Clause (ii) was examined, which denies Modvat credit for packing materials enjoying exemption on excise duty. As the exemption under Notification 34/83 was not available post-30-6-1986, the appellant did not contravene this clause during the period in question. Consequently, the tribunal concluded that neither exclusion Clause (ii) nor (iii) applied to the case, allowing the appellant the benefit of Modvat credit.

In light of the above analysis, the tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant.