1983 (5) TMI 246 - AT - Central Excise

Summary

Issues Involved:
1. Double Taxation on Wrapper Paper
2. Marketability of Wrapper Paper
3. Rule 56A Credit
4. Time-Barred Demand

Issue-wise Detailed Analysis:

1. Double Taxation on Wrapper Paper:
The primary contention revolves around whether the duty on wrapper paper should be levied twice: once when it is manufactured and again when it is used to wrap other paper products. The appellant argued that this constitutes double taxation, which is contrary to the law. They cited the Tribunal's decision in Rayalaseema Paper Mills Ltd. v. The Collector of Central Excise, Hyderabad, which held that duty on wrapper paper cannot be levied twice. Conversely, the department argued that double taxation is permissible based on public interest needs. The Tribunal clarified that there is no double taxation in this case, as the wrapper paper is a marketable commodity and its duty is assessed when manufactured. The duty on the wrapped contents includes the value of the wrapper paper, similar to how a tin can's value is included in the total package value when it contains goods.

2. Marketability of Wrapper Paper:
The appellant contended that the wrapper paper is not marketable until it is used to wrap other papers and cleared from the factory. The Tribunal rejected this argument, stating that marketability does not depend on whether the manufacturer chooses to sell the product. The wrapper paper is marketable once manufactured and used for its intended purpose, which is sufficient to make it excisable.

3. Rule 56A Credit:
The appellant claimed that they were denied proforma credit under Rule 56A because the wrapper paper was manufactured within the same factory. The department argued that Rule 56A's explanation, effective from 1-7-1980, does not apply retroactively. The Tribunal observed that the explanation to Rule 56A clarifies that component parts produced in the same factory are included. Although the explanation was added in July 1980, it elucidates the existing law and should apply to past matters as well. However, since the matter is still under examination by the Central Excise authorities, the Tribunal refrained from passing an order on this issue.

4. Time-Barred Demand:
The appellant argued that the demand for duty was time-barred. The department countered that the goods were provisionally assessed, making the time bar inapplicable. The Tribunal found no evidence that the demand resulted from the finalization of a provisional assessment. The demand letter did not mention provisional assessment, and no duty was collected provisionally. The Tribunal concluded that the demand was time-barred. However, since the duty was paid under protest and was legitimately payable, the Tribunal did not order a refund.

Separate Judgments:
- S. Vankatesan, Sr. V.P.: Agreed with the main conclusion that the full cost of the wrapping paper, including any excise duty paid on it, should be included in the value of the "wrapped" paper for assessment purposes. He highlighted the recent Supreme Court decision on valuation principles, which supports including packing costs in the assessable value.
- S.D. Jha, M. (Jud.): Concurred with the main conclusion but expressed reservations about not granting a refund despite the demand being time-barred. He emphasized that paying duty "under protest" reserves the right to challenge the demand, including on the grounds of being time-barred.

Conclusion:
The Tribunal confirmed the lower authorities' action, rejecting the appeal. The assessment of duty on wrapper paper as a separate excisable commodity was deemed lawful, and the plea of double taxation was found to be unfounded. The demand was time-barred, but since the duty was paid under protest and was legitimately payable, no refund was ordered.