1984 (6) TMI 53 - HC - Central Excise

Proforma Credit under Rule 56A available even if no manufacturing process is undertaken - Paper - Manufacture

Summary

Issues Involved:
1. Eligibility for proforma credit under Rule 56-A of the Central Excise Rules, 1944.
2. Interpretation of Rule 56-A concerning finished products used for convenient distribution.
3. Double taxation on wrapping paper.
4. Legal validity of double incidence of duty.

Issue-wise Detailed Analysis:

1. Eligibility for Proforma Credit under Rule 56-A of the Central Excise Rules, 1944:
The assessee, a public limited company manufacturing various types of paper, applied for proforma credit under Rule 56-A for excise duty paid on wrapping paper used for captive consumption. The Assistant Collector initially rejected this application, but the Appellate Collector remanded the matter for reconsideration. Upon reevaluation, the Assistant Collector again denied the benefit, which was overturned by the Appellate Collector. The Tribunal, however, supported the Assistant Collector, stating that Rule 56-A does not apply as the wrapping paper is used for distributing other paper products, not itself.

2. Interpretation of Rule 56-A Concerning Finished Products Used for Convenient Distribution:
Rule 56-A allows manufacturers to receive duty-paid materials or finished products for manufacturing or convenient distribution of finished products and claim credit for previously paid duty. The Tribunal's interpretation was that the rule applies only when the finished product is used for its own distribution. However, the High Court disagreed, stating that the rule aims to prevent double taxation on materials used for distributing specified excisable goods, not just the same finished product.

3. Double Taxation on Wrapping Paper:
The assessee argued that including the value of wrapping paper in the value of packaged goods results in double taxation, which Rule 56-A aims to avoid. The High Court emphasized that Rule 56-A is designed to provide relief against double incidence of duty, supporting the assessee's view that the wrapping paper used for distributing other paper products should qualify for the benefit under Rule 56-A.

4. Legal Validity of Double Incidence of Duty:
The High Court did not entertain the argument that double incidence of duty is illegal, as the assessee sought relief under Rule 56-A, which inherently addresses double taxation. The Court stated that if double incidence is deemed illegal, there would be no need for Rule 56-A, thus restricting the scope of the argument to the application of the rule itself.

Judgment Summary:
The High Court concluded that Rule 56-A applies to the wrapping paper used for the convenient distribution of other paper products manufactured by the assessee. The Court found the Tribunal's interpretation too restrictive and emphasized that the rule aims to prevent double taxation on materials used for distributing specified excisable goods. The question referred was answered in favor of the assessee, granting them the benefit of Rule 56-A. The Court also rejected the oral request for leave to appeal to the Supreme Court, noting that the case did not involve a substantial question of law of general importance.