1999 (7) TMI 394 - AT - Central Excise

Issues Involved:
1. Eligibility of plastic crates used in the manufacture of aerated waters for Modvat credit.

Detailed Analysis:

Issue 1: Eligibility of Plastic Crates for Modvat Credit
The primary question in these appeals is whether plastic crates used in the transportation of aerated waters qualify for Modvat credit under Rule 57A of the Central Excise Rules. The appellants, manufacturers of aerated waters, use plastic crates to transport filled bottles. They argue that these crates should be eligible for Modvat credit as they are used "in or in relation to the manufacture" of aerated waters, as stipulated in Rule 57A.

Arguments by the Appellants:
The appellants contended that the crates are integral to the manufacturing process and should be considered packaging materials. They cited several judgments to support their claim:
1. C.C.E., Calcutta v. Black Diamond Beverages Ltd. [1997 (91) E.L.T. 422 (Tri.)]
2. C.C.E., Calcutta v. Black Diamond Beverages Ltd. [1998 (103) E.L.T. 655 (Tri.)]
3. Black Diamond Beverages Ltd. v. Collector [1998 (103) E.L.T. 340 (Tri.)]
4. Delhi Bottling Company v. C.C.E., Chandigarh [1999 (105) E.L.T. 42 (Tri.)]

These judgments collectively held that plastic crates used for transporting aerated water bottles are indeed packaging materials under Rule 57A. The appellants emphasized that the term "packaging materials" should be interpreted broadly, as decided in G. Claridge & Company Ltd. v. C.C.E. [1991 (52) E.L.T. 341 (S.C.)].

Arguments by the Respondent:
The department argued that the crates do not qualify for Modvat credit because they are not packaging materials and their cost was not included in the assessable value of the final product during the preceding financial year. The lower authorities agreed with this view, leading to the current appeals.

Tribunal's Consideration:
The Tribunal examined the issue in light of previous judgments. In Black Diamond Beverages Ltd. [1997 (91) E.L.T. 422], it was observed that plastic crates, unlike egg trays, are used for transporting bottles and should be considered packaging materials. The Tribunal noted that the term "packaging material" in Rule 57A includes all types of containers, with or without lids.

In Black Diamond Beverages Ltd. [1998 (103) E.L.T. 340], the Tribunal held that the cost of an article used multiple times should be prorated for a single use, a standard costing practice certified by a Chartered Accountant. This method was deemed practical and consistent with the rules.

In Delhi Bottling Company v. C.C.E. [1999 (105) E.L.T. 42], the Tribunal reiterated that Modvat credit is admissible when the cost of packing material is included in the assessable value, even on an installment basis. The Tribunal upheld the assessees' contention based on the inclusion of the cost of crates and bottles in the aerated water's cost.

Contrary Judgment:
The Tribunal acknowledged a contrary decision in Amritsar Beverages Pvt. Ltd. v. C.C.E., Chandigarh [1996 (85) E.L.T. 359 (Tri.)], where it was held that plastic crates did not qualify for Modvat credit. However, this judgment was overruled by the larger benches in subsequent cases, emphasizing that the term "packaging materials" should be interpreted broadly to include containers.

Conclusion:
The Tribunal concluded that plastic crates used for transporting aerated water bottles qualify as packaging materials under Rule 57A and are eligible for Modvat credit. The appeals were allowed, granting the assessees consequential relief.

Separate Judgment:
Member (Technical) Agreement:
The Member (Technical) agreed with the findings, noting that the term "packaging materials" should be given a wide interpretation to include containers themselves, not just materials for making containers. This interpretation aligns with the broader judicial consensus and previous judgments.

Final Order:
The appeals were allowed, and the assessees were granted consequential relief, affirming the eligibility of plastic crates for Modvat credit.

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