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TMI Blog1993 (10) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the manufacture of the Pediatric drops nor used in relation to the manufacture of the final product. Several show cause notices were issued and they were adjudicated by the Asstt. Collector by disallowing the Modvat credit of duty paid on plastic droppers. Appeal against the above order of the Asstt. Collector, was also rejected by the Collector (Appeals). Hence, the present appeal before the Tribunal. 4. The only issue to be decided in this appeal is whether plastic dropper brought in under Modvat scheme from outside and packed in the cartons containing pediatric drops in sealed bottle, could be construed to be an input used in or in relation to the manufacture of the final product. 5. Shri A.V. Naik agrees that plastic droppers are not subject to any process in the appellants' factory but are packed as such, by placing it in the cartons containing sealed bottles of pediatric drops. But he pleads that it is very necessary for administering the drops to children and is supplied with the bottle containing drops. The dropper is marked in "ML" for indicating the precise quantity of drops to be taken from the bottle for administering to the children. After the pilf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l product. It is not used either in the manufacture or in relation to the manufacture of Pediatric drops. It is merely placed in the cartons alongwith the sealed bottle of drops. Sealed bottle of drops is the final product to be marketed and it is ready foe marketing even without the dropper. Dropper is not a packing material used in relation to the packing of the Pediatric drops. It is facility given to the consumer for using it, after they open the bottle for use. It is not a component as in the case of dry cells considered in Jayshree Industries case. It is also not like 'name plate' in Electric fans as in the case of Jay Engineering. Name plate is required to be affixed as per Rule 51 of the Central Excise Rules, to show the name of the manufacturer, running serial number etc. It is a necessary component for marketing the electric fan. Packing of a dropper alongwith the bottle of pediatric drop is not a `must' nor can it be stated that it is a component of such drops or a packing material for drop. Hence, the basic requirement of Rule 57A is not satisfied. As against the decision of TELCO cited by the ld. counsel, Shri Mondal points out the decision of South Regional Bench in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are ordinarily sold at the factory gate. Here, the value component of dropper is added to the value of pediatric drops for purpose of levy of Central Excise duty on the final product. The Apex Court in the case of East End Paper Industries held that anything which goes to render the goods marketable at the factory can be regarded as component. Though we might agree with Shri Mondal that Pediatric drops may be marketed without dropper, but when they are actually marketed with dropper and their value is added to the value of the final product, can we reject it as an optional accessory for purposes of Modvat benefit? 7.3 Dropper is connected with the administration of prescribed dosage of drops and it is not a complementary gift given alongwith the bottles of drops. In a sense, as functionally designed, it is an attachable component of the bottle containing drops. Hence, even otherwise, it can be construed as an attachable component of the bottle but supplied separately. If we choose to call it an optional accessory and not a component, corollary of this proposition would lead to exclude the value thereof, being only an optional accessory. If the value of the dropper is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of East End Paper Industries and having regard to the basic concept of value addition in the Modvat Scheme, if the value of dropper is included in the value of the pediatric drugs and it is marketed at the factory gate in the form of pack with dropper, it has to be construed as a component more so in the context of the provisions of valuation as laid down in Sec.4 of the Central Excise Act. Being a component, contributing to the value addition of the final product, duty paid thereon would be eligible for Modvat credit. In this view of the matter, we allow the appeal with direction to restore the credit after ensuring that the value of dropper is included in the retail price of the final product declared under the Drugs (Price Control) Order in all the cases of the show cause notices covered by the impugned order. 9. [Assent per : P.K. Desai, Member (J)]. - While concurring with the reasonings given and the conclusion drawn by my learned Brother, because a sensitive issue is involved, having possibility of wide ranging repercussions, I deem it expedient to record separately my own approach to the problem. 10. The MODVAT (Modified Value Added Tax) Scheme, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of holding that anything required to make the goods marketable must form part of the manufacturing activity, and any material used, would be deemed to be the component part of the end-product. 15. With the basic concept of MODVAT being averting of cascading effect, and when the value of whatever goes with the final product marketed at the factory gate, being the criteria in ascertaining the assessable value, and when the value of the dropper is included in the assessable value of the pediatric drops under considerations, there could be no reason to deny the credit for the same. If that is not done, the very object of averting cascading effect is frustrated, and the effect could be that the customer would either be required to pay more, or would be deprived of having measuring dropper alongwith the drops. 16. It may also be noted, that the dropper supplied is fitted with caps which is used as a cap in the bottle after the filterproof caps are removed before taking the bottle in use. Thus, it has also the element of packaging material. 17. I therefore concur with the view expressed by my learned brother and hold that the appeal is allowed, subject to the qualificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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