1996 (7) TMI 346 - AT - Central Excise

Summary

Issues:
- Disallowance of deductions for cost of paper and interleaving operation in relation to Aluminium tea chest lining foil.
- Applicability of previous court decisions to the present case.
- Consideration of the Supreme Court decision in Collector of Central Excise v. Eastend Paper Industries Limited.

Analysis:
In this judgment by the Appellate Tribunal CEGAT, New Delhi, the issue revolves around the disallowance of deductions claimed by the appellants for the cost of paper and interleaving operation concerning the manufacture of Aluminium tea chest lining foil falling under Tariff Item 27. The Assistant Collector disallowed these deductions, a decision upheld by the Collector (Appeals), leading to the present appeal by the appellants.

The appellants relied on a decision by the High Court of Calcutta in India Foils Limited v. Union of India, where a similar dispute arose regarding the duty payment on tissue paper used in manufacturing Aluminium tea chest lining foil. However, the Tribunal found that the decision in India Foils Limited could not be applied to the present case due to the Supreme Court's ruling in Collector of Central Excise v. Eastend Paper Industries Limited. The Supreme Court in the latter case emphasized that any material required to make goods marketable must be considered a component part of the end product, thereby affecting the assessable value.

The Tribunal determined that the interleaving tissue paper used in the packaging process of the Aluminium tea chest lining foil was essential for making the product marketable. As a result, the cost of the tissue paper and the interleaving operation had to be included in the assessable value, aligning with the principles outlined in the Supreme Court decision. The Tribunal clarified that the decision in India Foils Limited was not applicable in the current scenario and hinted at the possibility of proforma credit entitlement if the wrapping paper had previously incurred duty.

Ultimately, with the clarification provided regarding the inclusion of costs in the assessable value, the Tribunal dismissed the appeal, affirming the disallowance of deductions for the cost of paper and interleaving operation in the manufacture of Aluminium tea chest lining foil.