1999 (4) TMI 182 - AT - Central Excise

Summary

Issues:
- Availability of Modvat credit on glass bottles used as durable and returnable containers.
- Inclusion of cost of glass bottles in the assessable value of final product.
- Interpretation of Chartered Accountant's certificate for determining pro-rata cost of glass bottles.
- Impact of Notification No. 36/95 on Modvat credit for glass bottles used for aerated waters.

Analysis:

The judgment by the Appellate Tribunal CEGAT, MADRAS dealt with two revenue appeals concerning the availability of Modvat credit on glass bottles used as durable and returnable containers. The first issue raised was whether the cost of such packing should be included in the assessable value, thereby affecting the Modvat credit eligibility. The department contended that the cost of glass bottles was not included in the final product's pricing, thus challenging the Modvat credit claimed by the respondents.

The respondents, on the other hand, argued that the cost of glass bottles had indeed been included in the final product's costing, as evidenced by a Chartered Accountant's certificate for the financial year 1995-96. The certificate detailed the expenditure on glass bottles, including depreciation, breakages, and maintenance, amounting to Rs. 28,07,121. The respondents maintained that this expenditure had been factored into the pricing of the final product, justifying their claim for Modvat credit.

The Tribunal analyzed the Chartered Accountant's certificate and found it to be comprehensive, specific, and in line with accepted accounting principles. The certificate indicated a pro-rata expenditure of Rs. 3.10 per crate for aerated water cleared by the respondents, further supporting the inclusion of glass bottles' cost in the final product's value. The Tribunal referenced previous judgments, such as Amrit Bottlers and Pure Drinks cases, which emphasized the importance of calculating and including the pro-rata cost in determining Modvat credit eligibility.

Regarding Notification No. 36/95 dated 17-11-1995, which excluded Modvat credit on glass bottles used for aerated waters, the Tribunal noted that the period of dispute in the appeals preceded this notification. Therefore, the exclusion of Modvat credit for glass bottles did not apply to the case at hand. Ultimately, the Tribunal dismissed the revenue appeals, affirming the validity of the Chartered Accountant's certificate and the inclusion of glass bottles' cost in the assessable value of the final product for Modvat credit purposes.