1998 (12) TMI 204 - AT - Central Excise

Summary

Issues Involved:
Whether manufacturers of Horlics "packed in unit container" are entitled to Modvat benefit on P.V.C. tubing used for affixing free supply steel bowl with Horlics bottles meant for export.

Analysis:
The main issue in this appeal is whether the manufacturers of Horlics, who attach a steel bowl to the bottles using P.V.C. tubing for export purposes, are eligible for Modvat credit on the tubing. The appellant's representative argued that the steel bowl is only attached for export bottles, making it part of the final product, and thus, the P.V.C. tubing should be considered a packing material eligible for Modvat credit. He cited a Tribunal decision where Modvat credit was allowed on cellotape used for sealing pouches of vegetable products as an eligible input in the final product's manufacture.

In response, the respondent argued that the Horlics bottles are complete even without the steel bowl and are marketed as such for home consumption. The steel bowl is attached only for export, and therefore, the P.V.C. tubing used for affixing it cannot be considered an input eligible for Modvat credit under Rule 57A. A previous Tribunal decision regarding syringes and needles packed with medicine not being considered packing material or an input in the final product's manufacture was also cited.

Upon considering both arguments, the judge noted that the Horlics bottle is marketable without the steel bowl, and the bowl is only attached for export purposes. The P.V.C. tubing, therefore, cannot be deemed part of the manufacturing process of the final product. The judge distinguished the case cited by the appellant's representative, where Modvat credit was allowed on cellotapes for sealing vegetable product pouches, as the packaging in that case was integral to the final product's manufacture. In contrast, the steel bowl attachment in this case was not essential for the Horlics bottle to be marketable. Referring to a Supreme Court decision, the judge affirmed that materials required to make goods marketable must be part of the manufacturing process. Thus, the judge upheld the lower authorities' decision to deny Modvat credit on the P.V.C. tubing used for affixing the steel bowl to the Horlics bottles meant for export.