1988 (3) TMI 202 - AT - Central Excise

Summary

Issues:
- Inclusion of the value of reel cores in the assessable value of paper for central excise duty calculation.
- Applicability of double taxation principles in the case of reel cores used as packing material.

Analysis:
1. Inclusion of Reel Cores in Assessable Value:
The appellants manufactured wrapping paper and reel cores, using the wrapping paper as a primary material. The central excise duty was paid on the wrapping paper under Item 17 of the Central Excise Tariff. However, no duty was charged on the reel cores as they fell under the residuary Item No. 68 and were exempt if captively used. The dispute arose when the Central Excise Department sought to include the value of reel cores in the assessable value of the paper, leading to demands for differential duty. The appellants argued that the reel cores were essential packing material and their value should not be added to avoid double taxation. They relied on precedents to support their claim.

2. Double Taxation Concerns:
The appellants contended that including the value of reel cores in the assessable value of paper would result in double taxation since the wrapping paper, which made up the reel cores, had already been taxed under Item 17. They cited the Madras High Court judgment and a Supreme Court ruling to argue against double taxation. However, the department argued that the cost of essential packing material should be included in the assessable value, regardless of its origin, to prevent inequitable taxation. They referenced Supreme Court and Bombay High Court judgments to support their position.

3. Judgment and Decision:
The Tribunal analyzed the facts and legal principles involved. They noted that the reel cores, being a different article from the wrapping paper, were exempt from duty and not subject to double taxation. The Tribunal agreed with the department's argument that the full intrinsic value of the paper, including the reel cores, should be considered for duty calculation. They distinguished the Seshasayee case and upheld the lower orders, dismissing the appeal. The Tribunal emphasized that the taxation structure allowed for multi-point taxation of final products, with relief provided selectively for duty paid on inputs.

In conclusion, the Tribunal ruled in favor of the department, upholding the inclusion of the value of reel cores in the assessable value of paper for central excise duty calculation, rejecting the appellants' argument against double taxation based on the distinct nature of reel cores and the taxation principles applicable to essential packing materials.