1998 (3) TMI 345 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit for soda ash used in the manufacture of aerated water.
2. Eligibility of Modvat credit for filter paper used in the manufacture of aerated water.
3. Eligibility of Modvat credit for glass bottles used in the packaging of aerated water.

Detailed Analysis:

1. Eligibility of Modvat Credit for Soda Ash:

The appellant contended that soda ash is used in multiple stages of the manufacturing process of aerated water, including water treatment and cleaning of glass bottles. The appellant relied on the decision in the case of Black Diamond Beverages Ltd., where Modvat credit was allowed for caustic soda used for washing glass bottles. The Tribunal noted that soda ash is essential for softening water and cleaning bottles, which are necessary steps in the production of aerated water. The Tribunal held that the appellants are entitled to the benefit of Modvat credit in respect of soda ash, following the precedent set by the Black Diamond Beverages case.

2. Eligibility of Modvat Credit for Filter Paper:

The appellant argued that filter paper is used to filter sugar syrup, which is a crucial step in the manufacture of aerated water. The Tribunal referenced the decision in Union Carbide of India v. CCE, where inputs used in the machinery for manufacturing paper were deemed eligible for Modvat credit. Applying this rationale, the Tribunal concluded that filter paper, being used in the process of manufacturing aerated water, qualifies for Modvat credit.

3. Eligibility of Modvat Credit for Glass Bottles:

The appellant claimed Modvat credit for glass bottles under Rule 57A of the Central Excise Rules, 1944, arguing that these bottles are essential for the final product. The Tribunal observed that the Collector (Appeals) remanded the matter to the adjudicating authority to examine whether glass bottles qualify as fixed assets by reviewing the appellant's balance sheets. The Tribunal did not delve into this issue further, noting that the matter was still pending with the adjudicating authority. The Tribunal allowed the appellants to raise all relevant legal and factual pleas before the adjudicating authority if the matter was still under consideration.

Additional Observations by Vice President:

The Vice President elaborated on the manufacturing process of soft drinks, emphasizing the importance of syrup making, water treatment, and bottling. He highlighted that soda ash, filter paper, and glass bottles are integral to these processes. The Vice President noted that glass bottles are essential for packaging and marketing aerated water, making them eligible for Modvat credit. He also pointed out that the department had issued trade notices and circulars indicating that Modvat credit on glass bottles and tin containers used for aerated water should be allowed, provided they are duty-paid.

The Vice President further referenced several legal precedents and clarifications, supporting the eligibility of Modvat credit for the inputs in question. He concluded that the appeal should be accepted, affirming the eligibility of Modvat credit for soda ash, filter paper, and glass bottles used in the manufacture and packaging of aerated water.