1991 (8) TMI 224 - AT - Central Excise

Summary

Issues:
- Appeal against order passed by the Collector (Appeals) regarding modvat benefit on printing ink and input chemicals/solvents.
- Interpretation of printing ink as a final product or intermediate product under Rule 57C and Rule 57D.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Collector (Appeals) concerning the modvat benefit on printing ink and input chemicals/solvents used in the manufacturing process. The appellants manufactured various products, including printed aluminum foils and printing ink for captive consumption. They also purchased printing ink from outside and claimed modvat benefit on duty paid for these inputs. The main issue was whether printing ink should be considered a final product or an intermediate product under Rule 57C and Rule 57D.

2. The Department argued that printing ink, being a final product capable of various uses beyond printing aluminum foils, should not be eligible for modvat benefit on input chemicals/solvents. They contended that the modvat credit cannot be given as per Rule 57C of the Central Excise Rules, which applies to goods occurring at the intermediate stage of the final product. They emphasized that printing ink is an independent final product and not an intermediate product in the manufacturing process.

3. The Tribunal noted that the appeal was specifically against the modvat credit on input chemicals/solvents used in printing ink, not against the exemption of cylinders allowed by the Collector (Appeals). The central question was whether printing ink, when used captively in the production of printed aluminum foil, should be classified as an intermediate product under Rule 57D or a final product under Rule 57C. The interpretation of these terms was crucial to avoid distortions in applying the rules.

4. The Tribunal analyzed that if the exempted printing ink was cleared at Nil rate of duty, it would be considered a final product under Rule 57C. However, since the printing ink was dutiable and exempted for captive consumption under Notification No. 217/86, it should be viewed as an intermediate product. The Tribunal examined the issue from the perspectives of potential revenue loss and the classification of printing ink as an intermediate product.

5. It was established that denying modvat credit on printing ink would not result in revenue loss, as the appellants could still avail credit on duty paid for inputs used in printing ink and pay duty on the final product. The Tribunal emphasized that the interpretation of 'intermediate product' and 'final product' under Rule 57D and Rule 57C, respectively, was crucial. In this case, both plain foils and printing ink were essential inputs for the final product, printed aluminum foil, and should be considered intermediate products in the manufacturing process.

6. The Tribunal referred to a Trade Notice issued by the Collector of Central Excise, Bombay-I, which allowed modvat benefit on inputs used in the preparation of caustic soda lye, similar to the situation with printing ink. Based on the analysis, the Tribunal rejected the appeal from the Department and upheld the order of the Collector (Appeals) regarding the classification of printing ink as an intermediate product falling under Rule 57D, not Rule 57C.