1988 (4) TMI 189 - AT - Central Excise

Issues Involved:
1. Whether single ply straw boards used captively for manufacturing multiple ply straw boards are subject to double levy of duty.
2. Applicability of Rule 9 and Rule 49(4) of Central Excise Rules regarding duty exemption for captive consumption of excisable goods.
3. Relevance of past judgments, including the Bombay High Court decision and the Tribunal decision in Guardian Plasticote Ltd. case.

Issue-wise Detailed Analysis:

1. Double Levy of Duty on Single Ply and Multiple Ply Straw Boards:
The primary issue revolves around whether single ply straw boards used captively for manufacturing multiple ply straw boards should be subjected to duty twice. The Collector of Central Excise (Appeals) ruled that no duty was chargeable on single ply straw boards captively consumed, as charging duty on both single ply and multiple ply straw boards would amount to double levy. The tariff description under entry No. 17 of Central Excise Tariff does not distinguish between single ply and multiple ply straw boards. Therefore, both types of straw boards fall under the same sub-item (1) of Tariff Item 17. The Tribunal upheld this view, stating that multiple ply straw boards are essentially the same as single ply straw boards and cannot be considered as paste boards. Consequently, duty can only be charged on the final product, i.e., multiple ply straw boards, to avoid double taxation.

2. Applicability of Rule 9 and Rule 49(4) of Central Excise Rules:
The respondents argued that under Rule 49(4) read with Rule 9 of the Central Excise Rules, excisable goods used within the same factory for manufacturing another excisable product under the same tariff heading are exempt from duty. This rule became effective from 9-7-1983. The Tribunal noted that the demand in this case was raised for the period from 20-3-1983 to 22-7-1983. Therefore, the benefit of this rule would only apply from 9-7-1983 to 22-7-1983. The proviso to Rule 9 allows excisable goods to be removed without payment of duty if they are used in the same factory for manufacturing another excisable commodity falling under the same tariff item, provided the final product is not exempt from duty. The Tribunal concluded that the respondents are eligible for this benefit for the period after 9-7-1983.

3. Relevance of Past Judgments:
The Tribunal considered the relevance of past judgments, including the decision of the Five Member Bench in Guardian Plasticote Ltd. case and the Bombay High Court decision in Union of India v. Babubhai Nylchand Mehta. The Tribunal noted that in the Guardian Plasticote Ltd. case, the laminated paper produced by laminating two layers of kraft paper was considered a new excisable commodity. However, the Bombay High Court ruled that bituminised kraft paper was not liable to Central Excise duty, as the process of coating and impregnating kraft paper did not amount to manufacture. The Tribunal decided to follow the Bombay High Court's judgment, which held that once duty has been paid on the initial product, no further duty can be charged on the processed product if it remains essentially the same. Therefore, in the present case, since duty was already paid on the multiple ply straw boards, no further duty could be charged on the single ply straw boards used to manufacture them.

Conclusion:
The Tribunal dismissed the appeal of the Revenue, upholding that no duty is chargeable on single ply straw boards captively consumed for manufacturing multiple ply straw boards. The Tribunal emphasized that charging duty on both stages would amount to double levy, and the benefit of Rule 49(4) read with Rule 9 applies to the period after 9-7-1983. The Tribunal also relied on the Bombay High Court's judgment, which precludes double taxation on the same commodity.

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