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TMI Blog1985 (3) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... he metal screw caps, bottles, labels, seals, etc. Materials used in bringing a substance up to the excisable stage can safely to considered inputs. 2. The learned Counsel for the department Mr. Sundar Rajan argued that a screw cap can never be a component part or an ingredient of the contents of these goods, meaning the Horlicks, which is a health drink. He quoted 1979 Vol 43 STC page 141, in which the High Court at Allahabad decided that a gramophone needle is not a part of a gramophone even though it is necessary for the functioning of the gramophone. Even though the gramophone cannot ran without the needle, the needle is still not a part of the gramophone and is not a component part of the gramophone. In 1969 Vol 23 STC page 306, the Allahabad High Court decided that a diesel engine is not a part of a motor car unless it has been specially adapted for such a motor car. In 1977 (40) STC page 437 in respect of copper wire, the High Court decided that a copper wire is not a component part of a transformer. Similar rulings were given by other High Courts in 1964 (15) STC page 734, 1980 (45) STC page 229, and by this Tribunal in 1985 (19) E.L.T. page 96. The fact that the goods un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In 1984 E.C.R. 1404, the Bombay Tribunal gave a judgment that duty paid on parts and accessories of motor vehicles were available for credit under Notification No. 201/79-C.E. He reiterated that the Collectorate was bound by the Government of India s decision in 1982 (10) E.L.T. 739 which was given in respect of their factory, M/s. Hindustan Milk Manufacturers. 4. We are not able to see the relevance of the cases quoted by the two sides. None of these. Court, Tribunal and Government of India judgments was a judgment on whether a metal screw cap formed a raw material or a component part of the contents like Horlicks. The 1982 (10) E.L.T. 739 decision of the Government of India that the learned Counsel for M/s. HMM Ltd. said should till the scales in his favour was about whole milk powder and skimmed milk powder put up in cloth or polyethylene bags for storage and captive consumption on regeneration of liquid milk and manufacture of milk products. Duty was demanded by the central excise on the whole milk and skimmed milk. The dispute was of a very different kind from this order and involved Notification No. 145/73, not the notification we have with us. There were other adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irical analogies they are valuable indeed, but we need a reference point or case that says a metal screw cap forms a raw material or component part of Horlicks assessable under item 1B, CET. We will, therefore, have to decide this contention on its own materials. 6. Notification No. 201/79-C.E. at the relevant time, that is to say, October, 1982, and later, read In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in suppression of the notification of the Government of India in the Ministry of Finance (Dept. of Revenue) No. 178/77-CE dated 18th June, 1977, the Central Government hereby exempts all excisable goods (hereinafter referred to as the said goods ), on which the duty of excise is leviable and in the manufacture of which any goods falling under item 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), have been used as raw materials or component parts (hereinafter referred as the inputs ), have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs. 7. M/s. HMM Limited claim that the metal screw caps that they use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his description is in essence, true of all the items of the Central Excise Tariff to the extent that whenever assessment is to be made of anything listed in the Tariff, the packing also forms a part of the value, weight, etc. that is presented and assessed to duty. This is in accordance with the law as prescribed in section 4 of the Central Excises and Salt Act, 1944, which provides that value - Where the goods are delivered at the time of removal in a packed condition, would include the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. 10. We have to keep this cardinal principle of the Central Excise Law constantly before us. The facts of commercial practice also are that, except in very rare cases, goods are packed in one form or another and in varying units, quantities and sizes. There are different units of packing for different goods. Cigarettes, for example, have unit packing of 10 and 20 which are further packed in unit wraps of 200 or 500 or 1000 and so on. Soaps are similarly packed in a primary unit packing followed by a secondary unit packing and so On. 11. When item 1B prescribes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken to extend to the placing of the metal screw cap on the bottle. Only then is a goods excisable under the First Schedule under item 1B manufactured and completed. Therefore, the screw cap must be seen as a raw material/a component of the excisable goods Horlicks. 13. The above arguments would be true except for the fact that the excisable goods are not the bottled aggregate but the Horlicks. It would be a serious misconception to urge that the excisable goods are the Horlicks in unit container. The excisable goods are the Horlicks. Because the item nomenclature describes the target goods as being in unit containers cannot be taken as a basis for holding the containers or parts of the containers as being components of the Horlicks. The Horlicks as a product was finished and complete. It needed no further material or part to go into it to complete it. Its manufacture was complete and the screw cap did not add to that completion. Had it been packed in a paper or polythene packet, it would still be finished perfect Horlicks. The absence of the screw cap would be no difference to the taste or the smell of the powder or the beverage prepared from it. Or if the tariff definition wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mponent of Horlicks then there can be no earthly reason why a wooden crate cannot be an ingredient of a refrigerator, or of a bar of soap. 15. The screw cap played no part in the completion of the manufacture of the Horlicks. The Horlicks was finished and in a form ready for consumption when it reached the bottling plant. There was no last process involving the metal screw cap. We understand a raw material and a component as one which takes the total manufacturing activity nearer the finished and completed product, the culmination product, the ultimate article. That article must receive directly from the raw material or component, a contribution without which it would not be that ultimate article. But once this ultimate article is perfected and requires no further contribution, nothing more can qualify as its raw material or component, however, desirable the new entrant may be as a complement or adjunct of the ultimate product, article. The metal screw cap contributed nothing to the Horlicks drink powder but it was a desirable and useful adjunct or complement, enabling the finished product to reach the consuming public in the proper condition, free from contamination and prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being subject to a duty of excise and includes salt. The excisable goods comprised in Item 1B of the CET are thus prepared or preserved foods put in unit containers and ordinarily intended for sale. In other words, prepared or preserved foods in bulk or put up in containers which are not unit containers and ordinarily intended for sale are not excisable goods under Item 1B CET within the meaning of Section 2(d) of the Act. 20. Notification No. 201/79, dated 4-6-1979 as amended by Notification No. 105/82, dated 28-2-1982 reads as follows :- In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in suppression of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 178/77-C.E. dated 18th June, 1977, the Central Government hereby exempts all excisable goods (hereinafter referred to as the said goods ), on which the duty of excise is leviable and in the manufacture of which any goods falling under item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), have been used as raw materials or component parts (hereinafter referred as the inputs ), from so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the screw caps could be said to have been used as a raw material or component part in the manufacture of the excisable goods (Horlicks, in the present case). It cannot be seriously contended that the screw cap has been used as a raw material. The question, therefore, narrows down to whether it has been used as a component part. A screw cap cannot obviously be said to be a component part of Horlicks as such for the simple reason that it is not an ingredient of Horlicks. But that is not the question in the present case. It is whether the screw cap has been used as a component part of the excisable goods which, as we have seen, is Horlicks put up in unit containers and ordinarily intended for sale . In my view there can be little doubt that the screw cap has been used to make up i.e. as a component part of the unit container in which Horlicks has been packed and without which Horlicks would not have fallen under item No. 1B. No doubt the expression unit container has been used in item 1B, one could argue that a container can hardly be a part of an excisable commodity in the normal course. In the vast generality of cases, the value of the container is includible in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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