2006 (10) TMI 288 - AT - Central Excise

Summary

Issues:
1. Whether glue used in the manufacture of paper & paperboard is subject to Central Excise duty.
2. Imposition of duty and penalty on the manufacturing company and its Joint Managing Director.
3. Applicability of circular on glue used in the paper industry.

Analysis:
The case involved a manufacturing company engaged in producing paper & paperboard and corrugated/cartons, using glue prepared in-house. The Revenue initiated proceedings claiming that the glue was excisable, necessitating Central Excise duty payment. The duty was confirmed, and penalties were imposed on the company and its Joint Managing Director. However, the Commissioner (Appeals) referred to a Trade Notice stating that glue with a short shelf life, like that produced by the appellant, was not marketable and hence not liable for Central Excise duty. This circular formed the basis for setting aside the duty demand and penalties. The appeals challenged this decision, seeking duty and penalties.

Upon review, the Tribunal noted that the circular specifically addressed glue made by the appellant from starch and dextrin powder, emphasizing their short shelf life and non-marketability. The circular also referenced a Supreme Court judgment and a subsequent Board circular reinforcing the non-marketability of such products developed for captive consumption. The appellant argued that the circular meant for glue in the cigarette industry did not apply to the paper industry. However, the Tribunal rejected this argument, emphasizing that the critical issue was the marketability of the glue, not the industry of its use. Since there was no evidence to suggest the glue had a shelf life making it marketable, the appeals were deemed meritless. Consequently, both appeals were dismissed.

In conclusion, the Tribunal upheld the Commissioner's decision based on the circular's applicability to the glue produced by the appellant for internal use in the paper industry. The judgment underscored that the marketability of the product, not the industry of its use, determined the liability for Central Excise duty. The appeals were rejected, affirming the non-levy of duty and penalties on the manufacturing company and its Joint Managing Director.