1985 (6) TMI 38 - HC - Central Excise

Summary

Issues:
Interpretation of the term "inputs" in Notification No. 201 of 1979 for excise duty set-off.

Analysis:
1. The petitioners, a cigarette manufacturing company, were availing excise duty set-off for certain materials used in the packing of cigarettes. However, the authorities disallowed the set-off claiming these materials did not qualify as "inputs" under the notification.

2. The central issue was the interpretation of the term "inputs" in the notification. The company argued that the packing materials were essential in the manufacturing process and should be considered as inputs for claiming the duty set-off.

3. The court noted that the company had been consistently paying duty on the entire product, including packing materials, and had received credit for it. The authorities' sudden change in interpretation led to the dispute.

4. The court emphasized that the legislative intent was to allow manufacturers to claim credit for all materials falling under Tariff Item No. 68 used in the manufacturing process. The term "inputs" should be interpreted broadly to achieve the notification's purpose.

5. The court clarified that its decision applied only to the original 1979 notification and did not consider any subsequent amendments, such as Notification No. 105 of 1982.

6. Ultimately, the court ruled in favor of the petitioners, setting aside the demand notice and directing the authorities to grant all relevant reliefs to the company within six months. No costs were awarded, and the company was required to maintain a bank guarantee for potential future liabilities.