1983 (7) TMI 330 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 56A of the Central Excise Rules, 1944 regarding proforma credit eligibility for wrapping paper used in packing other varieties of paper.

Analysis:
The appeal before the Appellate Tribunal CEGAT MADRAS involved a dispute over the eligibility of proforma credit under Rule 56A of the Central Excise Rules, 1944 for wrapping paper used in packing other varieties of paper. The Assistant Collector of Central Excise, Warangal Division, found that the wrapping paper did not qualify for proforma credit as it did not result in a new product and was not incidental to the completion of the finished product. However, the Appellate Collector of Central Excise, Madras, disagreed and allowed the proforma credit, leading to the current appeal by the Department.

The Senior Departmental Representative argued that the wrapping paper did not qualify for proforma credit under Rule 56A as it was not for the more convenient distribution of the wrapping paper itself but for other varieties of paper. Reference was made to the distinction between a finished product and finished excisable goods, highlighting that the wrapping paper did not meet the criteria for proforma credit eligibility.

Additionally, the Senior Departmental Representative cited a judgment by Justice Shri J. Koshal of Madras High Court in a similar case, emphasizing that packing is not a process of manufacture. The Andhra Pradesh High Court's decision in another case was also referenced, stating that packing other kinds of paper with wrapping paper does not constitute a manufacturing process.

The Counsel for the respondent argued that Rule 56A aims to prevent double taxation on the same product and cited a judgment by the Andhra Pradesh High Court to support the contention that once wrapping paper is assessed to excise duty, it should not be subject to duty again when used for packing other varieties of paper.

Furthermore, the Tribunal considered the Supreme Court's decision on the inclusion of the cost of packing in determining the assessable value of excisable products under Section 4 of the Central Excises and Salt Act, 1944. The Tribunal held that the wrapping paper, when used for packing other varieties of paper, did not lead to double taxation and did not violate the provisions of Rule 56A.

Ultimately, the Tribunal ruled in favor of the Department, setting aside the Appellate Collector's order and reinstating the Assistant Collector's decision that the wrapping paper was not eligible for proforma credit under Rule 56A as it was not intended for its own convenient distribution but for other varieties of paper.