Circular No. 321/37/97/CX dated 30/6/97

Subject: Admissibility of modvat credit on the raw materials for packing which is subsequently used for packing of the final product - dispute regarding.

References have been received from the field formations regarding denial of modvat credit on the raw material used in the manufacture of packing material for packing of final product.

2. It has been reported that Board"s Circular No.lO/90/CX.8 dated 13.02.1990 denies modvat credit on raw material for making modvat credit in respect of raw material as they are capable of being put to various uses one of which is making of ready-to-use packaging material.

3. Subsequent to the above, attention has been drawn to the judgement of Larger Bench of CEGAT in the case of M/s. Ashwini Vanaspati 1994 (70) ELT (754) T and the judgement of Madras High Court in the case of Ponds India Limited 1993 (63) ELT (3) Mad. wherein it had been held that packaging material not only refers to ready-to-use packing materials like boxes, containers, drums etc. but raw material also used for making packing material.

4. The issue has been re-examined in the light of the aforesaid quoted judgement of the Larger Bench which has also been accepted by the Board. I am directed to say that all pending disputes regarding eligibility of credit on raw material for packing material may be decided in the light of the aforesaid judgement in the case of M/s. Ashwini Vanaspati Ltd. 1994 (70) ELT (754) T. Board"s circular No.lO/90-CX.S dated 13.2.90 is hereby withdrawn.

Sd/-
(Mallika Arya)
Under Secretary to the Government of India

F.N0.267/22/97-CX.8

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