1985 (10) TMI 96 - HC - Central Excise

Summary

Issues:
1. Interpretation of Rule 56A of the Central Excise Rules, 1944 regarding proforma credit for wrapping paper used in packing other paper products.
2. Application of Rule 56A to the specific circumstances of the case.
3. Whether the wrapping paper qualifies as a raw material or component under Rule 56A.

Analysis:

1. The petitioners, a company engaged in the manufacture of paper, sought proforma credit under Rule 56A of the Central Excise Rules for duty paid on wrapping paper used in packing other paper products. The company argued that packing is necessary for convenient distribution of paper and thus qualifies for proforma credit. The Assistant Collector denied the request, stating that wrapping paper used for packing cannot be considered raw material or component. The company cited decisions from other High Courts supporting their claim.

2. The main contention was whether Rule 56A applied to the case. The rule allows credit for duty paid materials used in the manufacture of excisable goods for more convenient distribution. The company argued that as the wrapping paper was used for distributing other paper products, it should qualify for proforma credit. The opposing party contended that Rule 56A only applies when the material is used for the distribution of the same product, not different products.

3. High Courts in other cases, such as the Madras and Karnataka High Courts, supported the company's argument that wrapping paper used for distribution should not be subjected to excise duty again. Rule 56A requires duty paid on the material claimed for proforma credit, falling under the same tariff item as the finished goods. The Court held that the company was entitled to proforma credit for the duty paid on wrapping paper used in packing other paper products and quashed the Assistant Collector's orders.

4. The Court rejected the opposing party's argument that the company should have pursued alternative remedies, stating that the existence of an alternative remedy does not bar a writ petition if the order is based on an incorrect interpretation. The Court allowed the writ petition, quashed the orders, and directed the opposite parties to allow proforma credit for the duty paid on wrapping paper used for packing other paper products under Rule 56A.

5. In conclusion, the Court ruled in favor of the petitioners, granting the relief sought and emphasizing that duty paid materials used for more convenient distribution of finished products are eligible for proforma credit under Rule 56A. No costs were awarded in the judgment.