G.R. Sharma, J.
1. In the impugned order Ld. Commissioner (Appeals) had held
“In dview of the discussion above, the Modvat credit on plastic crates and bottles was admissible to the party as the proportionate cost of these items was included in the final product”.
Being aggrieved by this order, Revenue has filed the captioned appeal.
2. Arguing the case for the appellants Shri S.C.Pushakaran, Ld. DR submits that
a) that in the case of Sri Ram Drinks (P) Ltd. vs CCE Bhubaneshwar (1994 (72) ELT.427), CEGAT held that Modvat would not be admissible on such durable containers which were of returnable nature and it was categorically viewed that in the context of Advalorem duty, not only the provisions of Section 4(4) (d) (i) of Central Excise Act, 44 (say the Act) would be attracted for durable and returnable packages while determining the assessable value but also the exclusion clause of Rule 57A of the Central Excise Rules 1944 (say the Rules) (which excludes value of packing material/containers cost of which is not included in the assessable vaue of the final product) will come into play.
b) that a Reference application has been filed against CEGAT’s judgment dt.18/19.8.97 in te case of M/s. Black Diamond Beverages (1997 (103 EL.655) by the CCE, Calcutta-IV in which CEGAT has allowed Modvat credit on Bottles and Crates to the party.
c) that there is absolutely no justification in projecting the view that for the purposes of interpreting Rule 57A of the Rules, the term “Cost of packaging” or “Containers” can be taken to mean the pro-rata/instalment cost of packing materials or containers which may be worked out by an assessee taking help of Chartered Accountant etc. In the absence of any specific definition in the act or in the Rules, the terms “Cost” of any material will have to be interpreted and given As per Chambers 20th Century Dictionary, the terms “Costs” is indicative of the price at which it will be “obtainable” or “expenditure” which will be involved in obtaining the material”. When a manufacturer purchased cerain packaging material or containers, the price which he pays for the containers can be considered as cost of packaging material/containers. It thus normally not only includes the basic price charged by the seller for the containers can be considered as cost of packaging material/containers. It thus normally not only includes the basic price charged by the seller for the containers/packing materials but also the taxes/excise/sales tax/octroi and other expenses borne by him til the receipt of the packaging material/containers in the factory. Thus it is the total price/expenses suffered for acquiring the bottles/crates by the manufacturer which must be included in the assessable value of the aerated water (cleared in any dcrate on payment of duty) before he can claim benefit of the Modvat credit for corresponding number of bottles and created used in their packing.
d) that Section 4 of the Act is absolutely categorical in the matter of excusion of cost of durable/returnable packaging material form the assessable value. It gives no option to the assessee or the Department to include the cost of the durable containers which are returnable in determining the assessable value of the goods packed for duty purposes.
e) that in no case in the past the industry has intentionally paid nor department has sought to charge duty on some pro-rata cost of durable and of returnable containers. The facts have been otherwise as manufacturers have been seeking always exclusion of the cost of durable containers for duty purposes including their maintenance costs where collected from customers. It is also normal international Customs practice not to include for valuation of imported containers, value of durable containers in which these are packed for customs duty purposes if containers are returnable. The whole logic of not charging any duty on customs or excise side for costs/value attributable to durable containers is that the supplier is not normally recovering any consideration for such containers while selling the goods as the containers are returnable (and normally returned back) and some containers are used repeatedly while selling goods to different customers. Once it is not disputed that the aerated water bottles and crates are durable and being normally returned by Dealers to manufacturer for repeated use, their “cost” can not be included in assessable value of aerated waters as cleared. Consequently, such packaging materials and containers for which Modvat credit is claimed would be excluded from scope of “packaging material/containers” under Rule 57A of the Rules considering the wording of the relevant clauses at material time in the explanation under Rule 57A ibid which is in complete harmony with Section 4(4) (d) (i) of the Act.
f) that the assessee cannot have the option of including the cost of durable and returnable container s(whole or on pro-rata basis) when the legislature has specifically excluded cost of such returnable containers from section 4 of the Act Value. Once this option for Section 4 of the Act value is not there, the question of availability of Modvat in terms of Rule 57A of the Rules for corresponding durable containers will obviously not arise. Thus, the manufacturers can not be granted any Modvat credit on durable containers/crates as they are not including in the value of the aerated water.
g) that a Reference application on 2.3.98 against CEGAT”s Final Order No.A/939-946/97-NB dt . 5.9.97 in the case of M/s. Kandhari Beverages (P) Ltd. Chandigarh & Others. The decision of Tribunal is still awaited in this matter.
h) that in another decision, the Tribunal vide its Final Order No.A/308/99-NB (DB) dt.6.5.99 (flagged at P-139/C of linked file please) in the case of CCE, Meerut vs Mon Beverages (P) Ltd., Sahibabad held that there was substantial merit in the plea of the departmental representative that the certificate of the C.A. has been given undue weightage and has not been sufficient for establishing the vital issue of inclusion of cost of packing material in the assessable value of the aerated water and since credit was available only if the cost of material has been included in the assessable value of aerated water, the Tribunal was of the view that the matter required detailed and complete verification and for this purpose, the matter was remanded back to Commissioner (Appeals) who should satisfy himself on this aspect on the basis of evidence to be adduced before him by the party before passing a fresh order.
i) that in a similar issue, the CEGAT vide its Final Order No.A/310-311/99-NB (DB) dt. 6.5.99 in the case of M/s. Pure Drinks (P) Ltd. vs CCE, Delhi (flagged as P-144/C of linked file pease) remanded back the matter to concerned Commissioner for verification of the factual position regarding inclusion of the cost of packing material in the cost of aerated waters and if he was satisfied on such verification that the cost has been included and that duty has been paid thereon, credit should be extended to the party.
j) that in the case of M/s. Kandhari Beveraged (P) Ltd. vs CCE, Chandigarh, the Tribunal vide its Final Order No.A/751/99-NB dt/ 17.8.99 remanded the case back to the adjudicating authority to verify the records to clearly establish that pro-rata cost of glass bottle/crates has been included in the assessable value of final products i.e. Aerated water on the basis of arguments made by Departmental Representative that the certificates issued by a Chartered Accountant certified only manufacturing cost and it was not sufficient for determining that the pro-rata cost of glass bottles/crates has been included in the assessable value which was material for deciding whether modvat credit was admissible or not.
3. Shri M.P.Devnath, Ld. Counsel in reply to the contentions of the appellants submitted that the respondents herein are engaged in the manufacture of aerated water and are availing the benefit of Modvat credit on glass bottles and plastic crates; that the respondents are including the copy on pro-rata basis in the assessable value of aerated water; that the respondents were issued a Show Cause Notice proposing disallowance of Modvat credit on glass, bottles and plastic crates on the ground that the cost was not included in the assessable value; that the Asstt. Commissioner under his Order-in-Original dt.4.2.98 set aside the proviso contained in the SCN after examining the certificate issued by the Cost Accountant and gave a finding that pro-rata cost was taken into account while determining the assessable value of glass bottles and crates; that Revenue filed an appeal before the Commissioner (Appeals) and that the Commissioner (Appeals-uphold the order passed by the Asstt. Commissioner and rejected the Department’s appeal. He submits that the issue regarding admissibility of Modvat credit on glass, bottles and plastic crates, the issue has been finally settled by the following decisions of the Tribunal)
a) Black Diamond Beverages vs CCE 1998 (22 RLT.37)
b) Delhi Bottling Co. vs CCE 1997 (22) RLT.697
c) CCE Hyderabad vs Charminar Bottling Co. 1999*32) RLt.413
d) Devyani Beverages Ltd. vs CCE 1999 (33) RLT.73
He, therefore, prays that the impugned order may be upheld and the appeal may be rejected.
4. I have heard the rival submissions. I find that the short issue for determination in this appeal is whether Modvat credit is admissible on glass, bottles and plastic crates used as packaging material for aerated water. I find further that the Department has relied on a number of decisions of this Tribunal in support of his contention that Modvat credit was not admissible. On scrutiny of the cases cited and relied upon by the Department. I find that none of these cases decides the issue finally. In respect of inclusion of a cost of packaging material in the assessable value of aerated waters Chartered Accountant certificate has been taken as the document. I find that in the case of Black Diamond Beverages this Tribunal held that Modvat credit will be admissible on glass bottles used for containing aerated waters if pro-rata cost of glass bottles is included in the assessable value of aerated waters and in the case of plastic crates also, the same view was repeated by this Tribunal. Similarly in the case of Delhi Bottling co. & Others, this Tribunal followed the decision of the Tribunal in the case of Black Diamond Beverages & Others holding that Modvat credit will be admissible on glass bottles and plastic crates wherever cost of packing material even on instalment basis is included in the assessable value of aerated water. We note further that this Tribunal in the case of Char Minar Bottling Co. Ltd. held that Chartered Accountant’s certificate certifying that cost of glass bottles is included in the cost of aerated water on pro-rata basis, Modvat credit will be admissible.
5. On careful scrutiny of the above decisions cited and relied upon by the respondents as well as by the appellants, I find that the decisions cited by the respondents finally decided the issue i.e. when duty was chargeable on glass bottles & Plastic Crates on advalorem basis and Chartered Accountant’s certificate indicates that cost of glass bottles and plastic crates is included on pro-rata basis in the assessable value of aerated water, Modvat credit will be admissible. Following the ratio of the decision in the case of Black Diamond Beverages followed by the Tribunal in the case of Delhi Bottling Co. and the decision of this Tribunal in the case of Char Minar Bottling Co., I hold that Modvat credit will be admissible. In this view of the matter, Revenue’s appeal is rejected.