1990 (3) TMI 185 - AT - Central Excise

Summary

Issues:
- Whether duty paid on PEG used as a raw material for the manufacture of cellulose film is entitled to exemption under Notification No. 201/79-C.E.

Detailed Analysis:

Issue 1: Duty Exemption for PEG used in Cellulose Film Manufacturing
The case involved a dispute over the duty exemption eligibility of Polyethylene Glycol (PEG) used as a raw material for manufacturing cellulose film under Notification No. 201/79-C.E. The appellants contended that PEG was an essential component for the cellulose film production process as a softener/plasticizer. The Assistant Collector initially accepted this argument, ruling that PEG was indeed a raw material for cellulose film and exempt from duty. However, the Collector (Appeals) overturned this decision, stating that PEG was used when the cellulose film was already in a product stage, thus not qualifying for duty exemption.

Issue 2: Interpretation of Duty Set-Off Rules
The appellants argued that inputs essential for manufacturing a product should be entitled to duty set-off, citing Supreme Court precedents and Tribunal rulings supporting this view. They referenced a case involving the use of ethylene glycol in polyester film production to highlight the principle that inputs leading to the final product should be eligible for duty benefits. The appellants contended that PEG, being a crucial component in cellulose film manufacturing, should be considered a raw material entitled to duty exemption under the relevant notification.

Issue 3: Judicial Precedents and Tribunal Decisions
The Tribunal referred to various judicial precedents and Tribunal decisions to support the appellants' claim. These included cases where duty set-off was allowed for inputs used in manufacturing processes, such as sodium sulphate in paper production and wrapping paper in paper manufacturing. The Tribunal highlighted these cases to emphasize the consistent application of duty exemption principles for raw materials integral to the manufacturing process.

Conclusion:
After reviewing the arguments, case law, and the specifics of the manufacturing process involved, the Tribunal concluded in favor of the appellants. The Tribunal held that PEG was indeed a raw material essential for cellulose film production, making the appellants eligible for duty exemption under Notification No. 201/79-C.E. The appeal was allowed, granting consequential relief to the appellants based on the established principles and precedents in duty exemption cases involving essential manufacturing inputs.