ORDER
R. Jayaraman, Member (T)
1. This is an appeal directed against the order in original passed by the Addl. Collector of Central Excise, Bombay-II, bearing No. V-Adj. (Ch. 28) 15-91/90 dated 26-11-1991, ordering reversal of the modvat credit amounting to Rs. 1,44,497.54 and also imposing a penalty of Rs. 14,000/- on the appellants.
2. Though, a request for adjournment was made on behalf of the appellants by one Shri Venkatesh, Accountant of the firm, since we have fixed the date of hearing, while considering the stay application of the appellants, we have decided to hear Shri Naik with regard to the Department’s stand. Since after hearing him, we did not feel it necessary to have the presence of the appellants for deciding the matter on merits, we have not agreed to the request for adjournment and proceeded to dispose of the appeal. The undisputed facts involved are that the appellants, who are manufacturers of oxygen/Acetylene gases, receive calcium carbide as one of the inputs in metal containers. They take the modvat credit of the duty on this input as evidenced from the Gate passes, when these inputs are received. However, empty containers of calcium carbide were disposed of either as scrap or as old containers. The Department alleged that these empty containers, which are disposed of otherwise than as provided for in the Rules, duty has been worked out on the disposal value of the containers which was sought to be reversed from the modvat credit taken. In the adjudication proceedings held by the Addl. Collector, the impugned order was passed, against which the appellants have come in appeal. We find that there is no dispute that the modvat credit of the duty taken in respect of calcium carbide was, as per the gate passes and this duty amount is paid on the entire value of the calcium carbide including the packing charges. As per the provisions of Rule 57G of the Central Excise Rules, the credit has to be taken on the basis of the Gate pass, AR 1 or B/E or any other documents as may be prescribed. Accordingly, in this case, the credit of duty paid on calcium carbide has been taken and there is no dispute in this position. The Addl. Collector has held that the drums/barrels are being sold by the appellants and the subject drums/barrels come out of the factory without payment of duty and that is the reason for recovery of the duty by way of reversal of the modvat credit. He has not sought to point out any provisions of the Modvat Rules to extend Modvat credit on pro rata basis, excluding the duty element on packing materials. These drums/barrels cannot be considered to be waste arising out of processing of the inputs, for which credit has been taken so that provisions of Rule 57F(4) could be applied. Inputs depending upon their nature would be received either in a naked condition or in packed manner. Some of the packing materials might have scrap value or reusable value. All the same, duty on the input is paid on the entire value including the value of the packing material and this duty only is sought to be given as credit under Rule 57G. Hence, we are unable to agree with the Addl. Collector’s view that because the packing materials are not used in or in relation to the manufacture of the final product and they are being cleared as such, modvat credit taken on these used packing materials is required to be reversed. We, therefore, allow the appeal and set aside the order of the Addl. Collector.