Customs, Excise and Gold Tribunal - Mumbai
Collector Of C. Ex. vs Indian Aluminium Co. Ltd. on 30 August, 1991
Equivalent citations: 1994(69)ELT776(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. This is an appeal from the Revenue against the order passed by the Collector (Appeals) bearing No. KW-693/90-B. III dated 17-12-1990.
2. The facts of the case are that the appellants manufacture inter alia aluminium foils, including printed aluminium foils and they also manufacture printing ink for captive consumption in the printing of aluminium foils. They also purchase printing ink from outside. They claimed modvat benefit in respect of duty paid on printing ink obtained from outside on payment of duty and also in respect of duty paid on solvents, chemicals etc. used in the preparation of printing ink used for captive consumption in the printing of aluminium foils. They claimed the benefit of exemption in respect of printing ink used captively in printing of aluminium foils under Notification No. 217/86. While submitting the classification list claiming exemption for printing ink in terms of Notification No. 217/86, they indicated that they would be availing of modvat benefit in respect of duty paid on solvents and chemicals used in preparation of printing ink - an intermediary product - (exempted) and the modvat benefit would be taken against the duty payable on the final product namely printed aluminium foils. This claim was negatived by the Assistant Collector. When the matter was taken up in appeal, the Collector (Appeals) allowed the appeal of the respondents. The present appeal is against the said order.
3. Shri Naik, for the Department, mainly pleaded that printing ink, by itself, is a final product. The fact that they are getting such printing ink on payment of duty from outside indicates that it is a final product. Printing ink is capable of being put to many uses and is not exclusively for printing of aluminium foils. Hence, when the respondents claim benefit of exemption in respect of printing ink manufactured by them for captive use in printing of aluminium foils, in terms of Notification No. 217/86, they cannot avail of modvat benefit in respect of input chemicals/solvent used in the manufacture of printing ink, which is a distinct final product and is exempted. The modvat credit cannot be given because of the provisions of Rule 57C of the Central Excise Rules. Benefit of Rule 57D is not applicable because it is available only in respect of goods occurring at the intermediate stage of the final product. Manufacture of printing ink is an independent line of manufacture of final product itself and printing ink does not occur at an intermediate stage.
4. After hearing Shri Sejpal, the Ld. Advocate, we observe that though the Collector (Appeals) has dealt with two issues in the said order, the Department has come up in appeal only against the allowing modvat credit in respect of input chemicals/solvents used in the preparation of printing ink, which, in turn is used captively in printing of aluminium foils. The other issue relating to exemption of cylinders allowed by the Collector (Appeals) is not agitated before us in this appeal. Hence, confining ourselves to the issue raised before us, we find the question to be answered in this appeal falls within the short compass - as to whether printing ink manufactured by the respondents and captively consumed in the manufacture of final product - printed aluminium foil and hence exempted in terms of Notification No. 217/86, could be construed to be an intermediate product envisaged under Rule 57D or it is a final product as envisaged under Rule 57C. The term 'final product' or 'intermediate product' have to be interpreted in the context of the provisions of Rules 57C and 57D; otherwise it may lead to distortions in applying these rules. What may be a final product in respect of one manufacturer may be a component for another and if he manufactures that component himself for captive consumption, it may even be an intermediate product in the line of manufacture of final product. Hence, while applying the provisions of Rule 57C, one has to approach the issue in the context of the objective behind that rule vis-a-vis that contained in Rule 57D. This is what we propose to do.
5. If printing ink is per-se exempted and such exempted printing ink is cleared outside at Nil rate of duty, it is a final product cleared from that factory at 'Nil' rate of duty and hence provisions of Rule 57C would be attracted. Here it is not the case. Printing ink is a dutiable item and it is exempted for captive consumption under Notification No. 217/86. This notification is analogus to benefit accruing from modvat scheme, to prevent unproductive scriptory work involved in paying duty on such product and taking credit within the factory of manufacture, when used further in the line of manufacture of final product. Hence, for judging on the correctness of the order, we looked at the issue from two angles (i) whether there is any revenue loss; (ii) whether printing ink, in this case, could be construed as intermediate product
6. On the first angle referred to above, it is not disputed that if the respondents agree to load themselves with the scriptory work and keep away from Notification No. 217/86, they can avail credit in respect of duty paid on inputs used in printing ink, on which they can pay duty, which duty can be utilised against the duty payable on printed aluminium foils. Even Shri Naik, on our query conceded this position. Hence, extension of modvat credit, in this case, does not have any revenue loss. If it is denied, they can always avail the benefit by following the chain of credit as indicated above. Hence, the appeal from the Department does not satisfy us from the angle of revenue loss.
7. Now coming to the legal aspect, we are on the question of interpretation of the terms 'intermediate product' used in Rule 57D vis-a-vis 'final product' used in Rule 57C. The undisputed factual position is that the respondents' final product inter alia includes printed aluminium foil. For obtaining this final product, plain aluminium foil obtained by rolling aluminium ingots/billets and also printing ink are identifiable as inputs going into the manufacture. Though the line of manufacture of plain foils is different, which has to be obtained independent of the line of manufacture of printing ink, both are products which are in the nature of essential inputs for printed aluminium foils. Hence, in such a case, where the final product is obtained by combining two or more inputs manufactured in the same factory and thereafter subjecting them to process of manufacture of final product, each such product, has to be regarded as a product occurring at the intermediate stage in the line of manufacture of final product - namely printed aluminium foil. Printing ink also goes in to the stream of manufacture of final product - printed foil. It is also an essential component of printed foil. Hence, in such a case, both plain foils as also printing ink are to be regarded as intermediate products, which are to be obtained in the course of manufacture of printed foil. The same view is found to be reflected in the Trade Notice No. 21/90, dated 6-3-1990 issued by the Collector of Central Excise, Bombay-I, (cited by the learned Advocate), wherein the Department have allowed modvat benefit in respect of inputs used in the preparation of caustic soda lye (exempted for captive use as per the same Notification) which in turn is used in the manufacture of paper. Hence, we are of the view that provision of Rule 57C cannot be attracted in this case and the case falls within the purview of Rule 57D. We, therefore, reject the appeal from the Department and confirm the order of Collector (Appeals) on this issue.