1984 (12) TMI 67 - HC - Central Excise

Summary

Issues:
Interpretation of Rule 56A of the Central Excise Rules, 1944 regarding the entitlement to proforma credit for duty paid wrapper paper used in the packing of other varieties of paper.

Detailed Analysis:

1. Background and Legal Formulation:
The case involves a reference under Section 35G of the Central Excises and Salt Act, 1944, regarding the entitlement to proforma credit under Rule 56A for duty paid wrapper paper used in packing other paper varieties. The company, engaged in paper manufacturing, sought permission for proforma credit, which was initially rejected but later allowed by the Collector of Central Excise (Appeals). The appeal by the Revenue to the Customs, Excise and Gold Appellate Tribunal was allowed based on a previous decision. The Tribunal's decision was based on the interpretation of Rule 56A.

2. Interpretation of Rule 56A:
Rule 56A provides a special procedure for the movement of duty paid materials for use in the manufacture of excisable goods. The primary conditions for applying this rule are that duty must have been paid for the material claimed for proforma credit, and the material and the excisable goods must fall under the same tariff item. In this case, both conditions were met as the wrapper paper and other paper varieties belonged to the same tariff item, and duty was paid on the wrapper paper.

3. Analysis of Tribunal's Interpretation:
The Tribunal interpreted Rule 56A to mean that the duty paid material must be used for the convenient distribution of the same finished product on which duty was paid. However, this interpretation is flawed as the rule allows for a rebate on duty paid on one product when it is used for the convenient distribution of a different finished product falling under the same tariff item. The Andhra Pradesh High Court and Madras High Court have also supported this interpretation in previous cases.

4. Correct Interpretation of Rule 56A:
The correct interpretation of Rule 56A is that the duty paid material can be used for the convenient distribution of a different finished product under the same tariff item to claim a rebate. The purpose of the rule is to allow a credit on duty paid on a product when it is utilized for the distribution of another finished product. Therefore, the Tribunal's interpretation restricting the use of duty paid material for the same product's distribution is incorrect.

5. Conclusion:
In conclusion, the High Court answered the question in the affirmative, ruling against the Revenue. The correct interpretation of Rule 56A allows for proforma credit on duty paid material used for the distribution of different finished products under the same tariff item. No costs were awarded in this case.

This detailed analysis highlights the interpretation of Rule 56A and its application in the context of duty paid wrapper paper used in the distribution of other paper varieties, emphasizing the correct understanding of the rule for claiming proforma credit.