Minutes of the Modvat meeting held at Bangalore on 29-11-1989 - Point No. 21 & 23 regarding admissibility of Modvat credit on packaging materials used in the manufacture of final products leviable to specific rate of duty - Central Excise - 37/90-CX.8

Minutes of the Modvat meeting held at Bangalore on 29-11-1989 - Point No. 21 23 regarding admissibility of Modvat credit on packaging materials used in the manufacture of final products leviable to specific rate of duty Circular No. 37/90-CX.8 Dated 3-7-1990 [From F.No . 263/77/89-CX.8] Government of India Central Board of Excise Customs New Delhi Subject : Minutes of the Modvat meeting held at Bangalore on 29-11-1989 - Point No. 21 23 regarding admissibility of Modvat credit on packaging materials used in the manufacture of final products leviable to specific rate of duty. I am directed to refer to the minutes of Point No. 21 23 of the Modvat meeting held at Bangalore on 29-11-1989 on the above subject. Vide Board's instructions F. No. 267/38/88-CX.8, dated 28-6-1988 (Circular No. 19/88), it has been clarified that Modvat credit would be available on the packaging materials used in the manufacture of final products leviable to specific rate of duty. It has been represented that CERA is raising objection on this issue. The matter has been examined by the Board in consultation with the Tax Research Unit. It is observed that Rule 57A specifically allows Modvat credit on packaging materials. However the explanation thereto prescribes that for purpose of this rule, input does not include packaging materials the cost of which is not included or had not been included during the preceding financial year, in the assessable value of the final product under Section 4 of the Act. The explanation aforesaid is applicable to those final products which are chargeable to ad valorem rates of duties. In case of final products which are specified rated, the aforesaid explanation may not be of any relevance. Moreover, the rates of specific duties on the excisable products are fixed on the basis of the price of the products in the wholesale market taking into account the value of the packaging materials. Therefore Modvat credit of the duty paid on the packaging materials where the final products are chargeable to specific rate of duty is in accordance with the principles of the Modvat Scheme. Since packaging material has been treated as an input for purpose of Modvat credit, it would be unjust to deny Modvat credit on the packaging materials used in the manufacture of final products leviable to specific rate of duty. It has therefore been decided that explanation (b) (ii) will not be attracted in case of specific rated final products and Modvat credit would be permissible without reference to value of the input in the assessable value of the final products. Board's instructions issued vide Circular No. 19/88 dated 28-6-1988 therefore appear to be correct and need no review." Audit objections may be settled accordingly. Trade and field formations may be advised suitably.