2000 (12) TMI 279 - AT - Central Excise

Summary

Issues:
1. Availment of Input Modvat credit on duty paid HDPE bags used for packing detergents.
2. Interpretation of Modvat Rules and Section 4A of the Central Excise Act.
3. Eligibility of HDPE bags cost as part of assessable value.
4. Exclusion of packing material cost from assessable value.
5. Application of Rule 57B(2)(v) in determining eligibility for Modvat credit.
6. Consideration of the value of HDPE bags in the sale price.

Analysis:
1. The appeal before the Appellate Tribunal concerned the availment of Input Modvat credit on duty paid HDPE bags used for packing detergents by a manufacturer acting as a job-worker. The Commissioner (Appeals) held that Modvat credit could be availed as the duty was discharged by the manufacturers under Section 4A of the Central Excise Act, relating to the maximum retail price printed on the packs.

2. The Commissioner's decision was challenged on various grounds by the Revenue. The Modvat scheme's basic requirement was analyzed, emphasizing that the cost of eligible inputs must form part of the assessable value. The Commissioner's interpretation was supported by the absence of any provision debarring Modvat credit in such situations under Rule 57B(2)(v) of the Modvat Rules.

3. The eligibility of the HDPE bags' cost as part of the assessable value was a crucial point of contention. The Commissioner highlighted that the cost of the HDPE bags was essential for marketing the goods in the wholesale market, as supported by previous legal precedents. The inclusion of the HDPE bags' cost in the value of the final product was deemed necessary under Section 4.

4. The evolution of the exclusion clause for packaging material under Rules 57A and 57B was examined, showing a shift towards not requiring a direct relationship with the actual inclusion of costs in the value of the final product under Section 4. The amendment introduced in Rule 57B emphasized the inclusion of packing material costs in the value of the product, irrespective of statutory requirements under Section 4.

5. The Tribunal considered the value of the HDPE bags in the sale price, noting that the cost of the bags was built into the sale price printed on the retail packs. The certificate provided by a Chartered Accountant confirmed the inclusion of the HDPE bags' cost in the sale price, reinforcing the bags' eligibility as inputs for Modvat credit.

6. Ultimately, the Tribunal rejected the Revenue's appeal, affirming that the HDPE bags were eligible inputs, and their cost was included in the sale price, aligning with the provisions of Rule 57B(2)(v). The decision emphasized the importance of considering the value of inputs independently of Section 4 of the Central Excise Act.