1991 (4) TMI 223 - AT - Central Excise

Summary

Issues Involved:
1. Whether the term "packaging material" in Rule 57A is restricted to ready-to-use items like boxes, packets, sachets, etc., or includes items like printed and laminated aluminium foils.
2. Applicability of Rule 57F(2) for sending aluminium foils for conversion into sachets.
3. Whether the demand is time-barred for the period extending beyond six months.

Issue-wise Detailed Analysis:

1. Definition of "Packaging Material" under Rule 57A:
The appellants argued that "packaging material" in Rule 57A includes materials like printed and laminated aluminium foils, not just ready-to-use items like boxes or sachets. They contended that these foils, printed with details specific to the final product (medicaments), are clearly identifiable as packaging materials. The Assistant Collector, however, interpreted that only ready-to-use packaging materials qualify for Modvat credit.

Upon review, the Tribunal found that the term "packaging materials" has a wider connotation and includes materials used to create packaging. The Tribunal referred to previous judgments and dictionary definitions to support this interpretation. The Tribunal concluded that printed aluminium foils, which are specifically designed for packing medicaments, qualify as packaging materials under Rule 57A. Therefore, the appellants are entitled to Modvat credit for these foils.

2. Applicability of Rule 57F(2):
The appellants sought permission under Rule 57F(2) to send aluminium foils outside for conversion into sachets. The Assistant Collector and the Collector (Appeals) held that Rule 57F(2) applies only to inputs used directly in the manufacture of the final product, not for packaging materials.

The Tribunal disagreed, stating that Rule 57F(2) allows for the removal of inputs, including packaging materials, for job work. The Tribunal emphasized that packaging is an essential part of manufacturing medicaments, as per the Drugs Control Regulations. Therefore, sending aluminium foils for conversion into sachets falls within the scope of Rule 57F(2). The Tribunal concluded that the appellants are justified in availing the facility under Rule 57F(2) for job work related to packaging materials.

3. Time-bar Issue:
The demand for reversal of Modvat credit was issued beyond the six-month period specified in Rule 57-1. The appellants argued that the demand is time-barred based on the Supreme Court's judgment in J.K. Spinning & Weaving Mills, which held that Section 11A of the Central Excise Act provides a reasonable time limit.

The Tribunal noted that the Gujarat High Court, in the case of Torrent Laboratories Pvt. Ltd., held that the Modvat scheme is independent and does not attract Section 11A. However, the Tribunal chose to follow the Supreme Court's judgment, which provides a clear time limit for issuing demands. Since the demand was issued beyond six months, the Tribunal considered it time-barred.

Conclusion:
The Tribunal allowed the appeal of the assessee on merits, recognizing that printed aluminium foils qualify as packaging materials under Rule 57A and that Rule 57F(2) applies to sending these foils for conversion into sachets. Consequently, the Tribunal set aside the entire demand for reversal of Modvat credit. The Department's appeal on the ground of time-bar was not considered further, as the assessee's appeal was allowed on merits.