1995 (5) TMI 244 - AT - Central Excise

Summary

Issues:
1. Classification of reel core as packing material or intermediate product.
2. Applicability of Notification 217/86 to mill wrapper used in the manufacture of reel core.
3. Interpretation of Rule 57D of Central Excise Rules in relation to reel core.

Analysis:
The appeal involved the classification of the "reel core" as either packing material or an intermediate product used in the manufacture of paper. The appellants argued that the reel core is an essential component in the paper manufacturing process and should be considered an intermediate product. The Collector of Central Excise had imposed duty on the appellants based on the premise that the reel core is merely packing material. The Collector relied on previous Tribunal decisions to support this stance, citing the case of Collector of Central Excise v. Star Paper Mills and Ponds (India) Ltd. v. C.C.E. The Collector also invoked Rule 57D of the Central Excise Rules, stating that Modvat credit was not applicable to the reel core as it was deemed a finished product requiring no further processing.

The appellants contended that the Tribunal decisions cited by the Collector were no longer valid law. They referenced a Supreme Court judgment on the Star Paper Mills case, which established that the reel core is a component part of paper, not packing material. Additionally, they highlighted a Madras High Court decision overturning the Tribunal ruling in the Ponds India Ltd. case. The appellants also pointed out a Ministry of Finance circular indicating that credit on inputs is permitted for exempted intermediate products as per Notification 217/86, a condition they claimed to fulfill in this case. The Tribunal acknowledged the appellants' arguments, noting the Supreme Court and High Court rulings supporting the classification of the reel core as an intermediate product. Consequently, the Tribunal set aside the impugned order and allowed the appeal.

In conclusion, the judgment clarified the classification of the reel core as an intermediate product rather than packing material, emphasizing the applicability of Notification 217/86 and the interpretation of Rule 57D in the context of the case. The decision underscored the importance of legal precedents and authoritative interpretations in resolving disputes related to excise duty classifications and exemptions.