1990 (11) TMI 273 - AT - Central Excise

Summary

Issues:
- Appeal against denial of Modvat benefit for metal containers used for packing paints and varnishes.
- Interpretation of Notification No. 219/77 and explanation (b)(ii) to Rule 57A.
- Legal sustainability of Collector (Appeals) decision.

Analysis:
1. The appeal was filed challenging the order-in-appeal that set aside the denial of Modvat benefit for metal containers used for packing paints and varnishes. The Collector of Central Excise, Bombay-11 sought to overturn the order of the Collector (Appeals) and reinstate the Supdt.'s decision.

2. The argument presented was based on a previous decision by the Collector (Appeals) in similar cases, where it was held that even if the appellants were availing exemption under Notification No. 219/77, they were entitled to Modvat credit for packing materials. The Department contended that since the exemption granted under the notification was for paints and varnishes packed in smaller containers on a proportionate basis, the duty involved on these products, inclusive of containers, triggered explanation (b)(ii) to Rule 57A.

3. Upon reviewing Notification No. 219/77 and the explanation to Rule 57A, it was noted that the notification did not provide exemption for the duty of excise payable on the value of packing materials. The exemption was specifically for paints and varnishes packed in smaller quantities, adjusting the duty proportionately based on the quantities packed. Therefore, the Collector (Appeals) decision was deemed legally sustainable, and the Department's appeal was dismissed.

4. The Tribunal found that the notification did not cover the duty on packing materials, which explanation (b)(ii) to Rule 57A aimed to address. Consequently, the Collector (Appeals) decision was upheld, and the Department's appeal was rejected. The judgment emphasized the importance of a precise interpretation of notifications and rules governing excise duties to determine the applicability of exemptions accurately.