1984 (8) TMI 328 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for partial exemption from excise duty on synthetic detergents and soap based on the duty paid on printed cartons used for packing.
2. Whether the cost of printed cartons and packing should be considered post-manufacturing expenses and deductible from the assessable value of the finished product.
3. Interpretation of the term "inputs" as used in Central Excise Notification No. 201/79.
4. Whether packing amounts to a process of manufacture.

Issue-wise Detailed Analysis:

1. Eligibility for Partial Exemption from Excise Duty:
The appellants contended that synthetic detergents and soap were eligible for partial exemption from excise duty to the extent of the duty paid on printed cartons used in packing, under Central Excise Notification No. 201/79. The Assistant Collector and Appellate Collector rejected this claim, holding that packaging was not incidental or ancillary to the completion of the manufactured goods under Section 2(f) of the Central Excises and Salt Act, 1944. The Tribunal, however, concluded that the term "inputs" in Notification No. 201/79 has a wide scope and does not necessarily mean ingredients or components. The Tribunal held that the appellants were entitled to the benefit of Notification No. 201/79 for printed cartons until the notification was amended by Notification No. 105/82 on 28-2-1982.

2. Post-Manufacturing Expenses and Deductibility from Assessable Value:
The appellants alternatively argued that if the primary contention was not accepted, the cost of printed cartons and packing should be treated as post-manufacturing expenses and deductible from the assessable value of the finished product. The Assistant Collector and Appellate Collector rejected this, stating that only the cost of durable and returnable packing could be deducted under Section 4(4)(d) of the Central Excises and Salt Act. The Tribunal did not find it necessary to address this issue further, as the primary contention was upheld.

3. Interpretation of the Term "Inputs":
The appellants argued that the term "inputs" in Notification No. 201/79 referred to any goods falling under Item No. 68 of the First Schedule used in the manufacture of other excisable goods. They cited judicial pronouncements and dictionary meanings to support their claim that printed cartons could be considered "inputs". The Tribunal agreed, noting that the term "inputs" was intended to have a broad scope and not be restricted to raw materials or components. The Tribunal emphasized that the requirement for goods to be used as raw materials or components was only introduced with the amendment by Notification No. 105/82.

4. Packing as a Process of Manufacture:
The Tribunal examined whether packing amounts to a process of manufacture. It referred to previous decisions, including the Supreme Court's decision in Union of India v. Bombay Tyre International Ltd., which held that primary packing is part of the manufacturing process. The Tribunal concluded that normal minimum packing necessary for transportation or delivery should be treated as a process incidental or ancillary to the completion of the manufactured product. Therefore, printed cartons used for packing synthetic detergents were considered part of the manufacturing process.

Conclusion:
The Tribunal held that the appellants were entitled to the benefit of Notification No. 201/79 for printed cartons used in packing synthetic detergents until the notification was amended by Notification No. 105/82. The Tribunal did not address the alternative contention regarding post-manufacturing expenses, as the primary issue was resolved in favor of the appellants. All relief flowing from this order was to be granted to the appellants within three months from the date of communication of the order.