Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Indo Swing Ltd. on 13 August, 1991
Equivalent citations: 1992(57)ELT606(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. E/188/90/MAS. This appeal has been filed by the Revenue against the order of the Collector of Central Excise (Appeals), Madras. The point that falls for consideration is whether the respondents are eligible for the benefit of MODVAT credit in respect of tissue paper brought in as input by them and which was later got waxed through a job worker and then utilised in their factory. The learned original authority has held that tissue paper as such could not be used by the respondents as packing material and it has necessarily to be, wax coated and inasmuch as wax paper is different commodity falling under different Tariff heading the wax paper could not be considered as input so far as the respondents are concerned. The learned lower appellate authority, however, has accepted the respondents' plea and held that mere waxing and change of classification of the input on account of waxing would not affect the respondents' claim for MODVAT credit inasmuch as the wax paper has to be taken as intermediate product and has set aside the original authority's order.
2. The appellant-Collector in the appeal has urged the following grounds :
"2.4. "Tissue Paper" is not used as such as packing material in this case. The actual packing material herein is "Wax coated paper" and unless duty has been paid on the wax coated paper Modvat Credit cannot be availed. Further, credit of duty on packing material would be admissible only when packing material is brought on payment of duty into manufacturer's premises in a ready to use condition.
In this case, the duty paid tissue paper was not brought into the manufacturer's premises, in a ready to use condition. It was subjected to further process of manufacture of wax coated paper by a job worker, brought back to As-sessees premises and subsequently put to use by the assessee for packing of finished products. As such the assessee is not entitled to credit of duty paid on the "Tissue Paper".
2.5 As per Rule 57C of Central Excise Rules, 1944 no credit of duty is to be allowed if the final product is exempt from the whole of duty or its chargeable to Nil rate of duty. The tissue paper after wax coating becomes converted paper falling under Chapter 4811 of the Central Excise Tariff which is exempt from payment of duty under Notification No. 49/87 Central Excise, dated 1-3-1987. Since in the present case no duty was paid on the converted paper having been manufactured out of duty paid tissue paper, the assessees are not entitled to take credit of duty paid on "Tissue Paper" under Rule 57C of the Central Excise Rules."
3. The learned JDR for the Department pleaded that the MODVAT declaration has been filed by the respondents showing the tissue paper as an input and pleaded that the respondents had removed the tissue paper for waxing to the premises of job worker after taking the permission under Rule 57F(2) and pleaded that at the job worker premises out of the tissue paper a different commodity viz. wax paper emerged and the same was exempted from payment of duty under Notification 49/87. He pleaded that wax paper could not be treated as intermediate product and in that view of the matter once an input had been used and a different excisable product, which was exempt from payment of duty, emerged by processing the same the benefit of MOD VAT credit could not be given in respect of the input. He has pleaded that while the tissue paper falls under Tariff Heading 4805.90 the wax paper falls under Tariff Heading 4811.
4. The learned Consultant for the respondents pleaded that the respondents paid duty on tissue paper and were processing part of the same into wax paper in their own plant and were sending part of the same outside for processing after obtaining the necessary permission from the Central Excise authorities under Rule 57F(2). He pleaded that the wax paper could be considered as intermediate product and in terms of Rule 57D even if the intermediate product was exempt from payment of duty, the benefit of MODVAT credit would be available. In this connection he cited the judgment of the Tribunal reported in 1988 (38) ELT 351 = 1988 (19) ECR 321. He pleaded that in any case in terms of Notification 217/86 the benefit of MODVAT credit would be available to them in respect of inputs which before their final use are converted into intermediate product either at the job workers premises or in their own factory. He pleaded that as it is the intermediate products manufactured out of the inputs when manufactured in the respondents' unit for use in respect of finished product for which the inputs were received, are exempt from payment of duty and likewise under Notification 214/86 intermediate products manufactured at the job workers premises are exempt. His plea is that the exemption had been given for the purpose with a view to ensure that no additional duty liability accrued when the inputs were processed for use in relation to the final product. He pleaded that inasmuch as the processing of waxing of paper was integrally connected with the use of the paper for the final product the benefit of MODVAT credit would be available to them and in this connection he cited the judgment reported in 1989 (43) ELT 201.
5. We observe that the short point that falls for our consideration is whether the specified input brought in for the purpose of use in relation to a specified finished product under Rule 57A when on processing gives rise to an intermediate product, which is exempt, the benefit of MODVAT credit in respect of the inputs received would be available. We observe that under Rule 57A by a specific mention packing material has been included in the definition of 'input' and the intention of the legislature, therefore, is to allow the benefit of MODVAT credit in respect of the packing material which by itself may not go into the manufacturing stream of the finished product but which is used after the finished product has emerged and the packing is required to be done for the purpose of marketing of the same as a process incidental and ancillary to the manufacturing process of a finished product. The question, therefore, that arises is whether the packing material should be used as such or the same can also go through a process of manufacture to facilitate its use for a specified finished product. We observe the respondents' finished product is safety razor blades. The tissue paper, it is seen, is allowed to be brought in as an input and this could be only by construing the same to be a packing material. Now, the tissue paper by itself admittedly cannot be used as a packing material as such and the same has necessarily to be waxed. The waxing of the paper is a separate manufacturing process and wax paper is a commodity which is having different characteristic from the tissue paper and answers to a different use and treated in the Tariff also, as a commodity different from the tissue paper. As it is now it is a well settled position as held by the Hon'ble Supreme Court and various High Courts and the Tribunal that coating of paper is a manufacturing process. Thus out of the tissue paper a different commodity has come into existence and this commodity is being used as a packing material. Wax paper cannot be treated as intermediate product as it does not emerge out of the manufacturing stream of the finished product during the process carried out on the inputs. Wax paper has been produced out of the tissue paper which by a specific inclusion under Rule 57A has been treated as an input. In the above view of the matter, therefore, we hold that the wax paper has to be treated as a finished product by itself and it is only by the application of the provisions of the MODVAT Rules that the benefit of MODVAT credit in respect of the tissue paper in relation to the use of the wax paper for wrapping purposes can be considered. Under Rule 57D the benefit of MODVAT credit in respect of the inputs cannot be denied in case an intermediate product, which is exempt from payment of duty, emerges in the process of manufacture. Inasmuch as we have held that wax paper is not an intermediate product in the context of the respondents' manufacturing process of finished product, the benefit of the rule is not available to them. Likewise, under Rule 57J the benefit is again available only when an intermediate product emerges in the use of the final finished product. The respondents have not claimed the benefit as it is under Rule 57J before us. The only claim made by the respondents is that in any event the wax paper would be eligible for the benefit of either Notification 217/86 or 214/86. But we do not find how this plea helps the respondents' case. The plea of the Revenue is that MODVAT credit taken on tissue paper is not available by virtue of its having been converted into wax paper, we hold that this plea of the Revenue has force and we, therefore, hold that the appeal of the Revenue has to be allowed. Ordered accordingly.
E/501/90/MAS.
6. This appeal has been filed by M/s. Indo Swing Ltd. against the order of the learned Collector (Appeals) dated 27-6-1990 upholding the learned original authority's order that tissue paper was not an input of the final product (razor blades) and the avail-ment of credit on tissue paper was illegal.
7. Since we have already allowed the Department's Appeal No. E/188/90 above accepting the plea of the Department that MODVAT credit taken on tissue paper was not available by virtue of its having been converted into wax paper, the present appeal by M/s. Indo Swing Ltd. is dismissed for the same reasons.