1983 (9) TMI 87 - HC - Central Excise

Summary

Issues:
1. Interpretation of Rule 56A of the Central Excise Rules, 1944 regarding excise duty on wrapper paper.
2. Claiming set off of duty paid on wrapper paper under Rule 56A.
3. Applicability of excise duty on wrapper paper used for packing reams/reels.

Analysis:
The judgment revolves around the interpretation of Rule 56A of the Central Excise Rules, 1944 concerning the excise duty on wrapper paper. The petitioner, engaged in the manufacture of paper/boards, was initially paying excise duty on the packed paper, including the wrapper. However, a change in practice from June 1972 led to separate duty assessments on wrapping paper and wrapped paper. This resulted in double payment of excise duty on the wrapper paper, first when taken for packing and then at the final clearance of packed reams/reels for customer supply.

The petitioner sought a set off of duty paid on the wrapper paper under Rule 56A, which allows manufacturers to claim a credit of duty already paid on materials or component parts used in finished products. The petitioner's claim was rejected by the Excise Department, leading to an appeal to the Appellate Collector, which was also dismissed. The petitioner then filed a writ petition seeking to quash these orders and obtain credit for duty paid on the wrapper paper.

In the judgment, the court analyzed Rule 56A, emphasizing that the rule aims to prevent double taxation on excisable goods. The court highlighted that once excise duty is paid on an item, it should not be subjected to duty again unless it undergoes further manufacturing processes. The court referenced a judgment from the Andhra Pradesh High Court to support the petitioner's argument that the wrapper paper, once assessed for excise duty, should not be taxed again when used for packing other paper varieties.

Ultimately, the court quashed the authority's orders, ruling in favor of the petitioner. The court held that the wrapper paper, having already incurred excise duty, should not be taxed again when used for the convenient distribution of finished products. The judgment allowed the petitioner's claim for credit on duty paid for the wrapper paper and awarded costs to the petitioner.

This judgment clarifies the application of Rule 56A in preventing double taxation on excisable goods and underscores the principle that excise duty should not be levied multiple times on the same item within the manufacturing process.