1992 (10) TMI 84 - HC - Central Excise

Summary

Issues Involved:

1. Eligibility for MODVAT credit on raw materials used for manufacturing exempted plastic containers.
2. Interpretation of "intermediate products" under Rule 57-D(2).
3. Whether the manufacture of plastic containers constitutes an intermediate stage in the manufacture of cosmetics under Section 2(f) of the Central Excises and Salt Act, 1944.
4. Interpretation of the expression "goods used in or in relation to the manufacture of the said final products" under Rule 57-A.

Summary:

1. Eligibility for MODVAT Credit on Raw Materials:

The applicant, a manufacturer of cosmetics, sought MODVAT credit for raw materials (LDPE, HDPE, PVC compound) used to manufacture plastic containers, which were exempt from excise duty. The Assistant Collector denied the claim, stating that the applicant could not avail MODVAT credit under Rule 57-A since the containers were exempt from duty. This decision was upheld by the Collector of Central Excise (Appeals) and the Tribunal. The High Court, however, disagreed, stating that plastic granules used to make containers are "inputs" under Rule 57-A, emphasizing the wide interpretation of "in relation to" and the inclusive definition of "inputs."

2. Interpretation of "Intermediate Products":

The Tribunal held that intermediate products must undergo further processing in the factory of production. The High Court disagreed, stating that the plastic containers manufactured from raw materials and used for packing excisable goods are intermediate products under Rule 57-D(2). The Court emphasized that the term "manufacture" under Section 2(f) includes any process specified in the Chapter Notes of the Central Excise Tariff Act, 1985, thus covering the manufacture of containers as an intermediate stage.

3. Manufacture of Plastic Containers as an Intermediate Stage:

The High Court held that the manufacture of plastic containers is an intermediate stage in the completion of the manufacture and clearance of cosmetics. Referring to Chapter Note No. 4 of Chapter 33, the Court stated that any treatment to render products marketable is construed as "manufacture." Thus, the containers are integral to the final product and their manufacture is part of the process.

4. Interpretation of "Goods Used in or in Relation to the Manufacture":

The High Court emphasized a liberal interpretation of the expression "goods used in or in relation to the manufacture of the said final products" under Rule 57-A. The Court held that plastic granules used to make containers for excisable goods fall within this expression. The Court also noted that the inclusive definition of "inputs" in Rule 57-A supports this interpretation.

Conclusion:

The High Court answered all four questions in favor of the applicant, allowing MODVAT credit for the raw materials used in manufacturing the exempted plastic containers. The Court emphasized the broad interpretation of relevant rules and definitions, ensuring that the cascading effect of excise duty is avoided.