Customs, Excise and Gold Tribunal - Delhi
Sirsilk Limited vs Collector Of Central Excise on 14 January, 1988
Equivalent citations: 1988(15)ECC263, 1988(34)ELT399(TRI-DEL)
JUDGMENT D.C. Mandal, Member (T)
1. Similar issue is involved in these two appeals and as such, the same are disposed of by this common order. The issue involved 's whether Acetate Yarn/Staple Fibre/Tow manufactured by the appellants are entitled to the concession granted under Notification No. 201/79-C.E., dated 4-6-1979. By this notification the Central Government exempted 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 (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. The Notification also envisages that the procedure set out in the Appendix to the Notification is to be followed and that nothing contained in this notification shall apply to the said goods which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty. According to Clause-l of Appendix to this notification, a manufacturer of the said goods shall give a declaration to the Superintendent of Central Excise having jurisdiction over his factory, indicating the full description of the said goods intended to be manufactured in his factory and the full description of the inputs intended to be used in the manufacture of each of the said goods.
2. The appellants submitted declarations to the Superintendent of Central Excise in terms of Clause-1 of Appendix to -the Notification No. 201/79-C.E., dated 4-6-1979 as amended by Notification No. 105/ 82-C.E., dated 28-2-1982 indicating the inputs and finished goods (output) as follows :-
Declaration Input Finished Goods (output) effective from
1. Acetaldehyde, Acetate Yarn/ 28-2-82 / 1-3-82 (T.I. 68) Staple Fibre/Tow
2. Acetic Acid Acetate Yarn/ 28-2-82 / 1-3-82 (T.I. 68) Staple Fibre/Tow Superintendent of Central Excise issued show cause notices No. 6/82, dated 8-11-1982 and 5/82, dated 8-11-1982 asking them to explain as to why the aforesaid declarations should not be rejected as incorrect and why proforma credit should not be denied to them on the grounds detailed in the show cause notices. After considering the replies submitted by the appellants with reference to the show cause notices, the Superintendent of Central Excise held that the appellants were not entitled to the benefit of Exemption Notification No. 201/79-C.E. In the Orders-in-original No. 1/83 and 2/83, both dated 17/18-3-1983, the. Superintendent of Central Excise has inter alia held that in the process of manufacture of Acetate Yarn/Staple Fibre/Tow from the declared inputs "Acetaldehyde" and "Acetic Acid" certain intermediate products, as given below, were manufactured by the appellants and one of the intermediate products is "Cellulose Acetate" falling under Tariff Item 15A(1) :-
As per Order-in-Original No. 1/83 ______________________________________
1. Acetic Acid Acetic Anhydride Exempted under Notification (T.I. 68) (T.I. 68) No. 118/75-C.E., dated 30-4-1975.
2. Acetic Anhydride (T.I. 68) + Cellulose Acetate Exempted under Notification Bleached Cotton [(T.I. 15A(1)] No. 118/75-C.E., Linter dated 30-4-1975.
(T.I. 68) J
3. Cellulose M.M. Yarn Exempted under Notification Acetate (T.I. 68) No. 38/73-C.E., dated 1-3-1973.
As per Order-in-Original No. 2/83, dated 17/18-3-1983 _______________________________________________________
1. Acetaldehyde Acetic Acid Exempted under Notification (T.I. 68) (T.I. 68) No. 118/75, dated 30-4-1975.
2. Acetic Acid Acetic Anhydride -do-
(T.I. 68) (T.I. 68)
3. Acetic Anhydride
(T.I. 68)
+ Cellulose Acetate -do-
Bleached Cotton [(T.I. 15AU)]
Linter
(T.I. 68)
4. Cellulose Acetate M.M. Yarn/Staple Exempted under Notification
[(T.I. 15 Fibre/Tow No. 38/73, dated
[(T.I. 18)] 1-3-1973.
Superintendent of Central Excise has held that Central Excise duty was payable by the appellants on the intermediate products and since Cellulose Acetate which is an intermediate product falling under Item 15A(1) of the Central Excise Tariff, "the said goods", viz., Acetate Yarn/ Staple Fibre/Tow were not eligible for the concession granted under Notification No. 201/79-C.E., dated 4-6-1979 as amended. The appeals filed by the appellants against those orders of the Superintendent of Central Excise were rejected by the Collector of Central Excise (Appeals) under the impugned orders. In paragraph 5 of the impugned order the Collector (Appeals) has held as follows :-
''I find appellants manufacture Acetate Yarn/Fibre/Tow assessable under T.I. 18. In this the benefit of duty paid on acetaldehyde/acetic acid has been sought for under Notification No. 201/79, as amended. The inputs that are used for the manufacture of acetic yarn/fibre etc. fall under Tariff Item 15A. Notification No. 201/79 gives the benefit of duty paid on the inputs only when the inputs fall under Tariff Item 68 and are used in the manufacture of Tariff Items 1 to 67. The input benefit cannot be entertained in this case, for the input falls under T.I. 15A as goes into the manufacture of T.I. 18. Hence appellants plea that the benefit of Notification No. 201/79 should be extended to them is not legally permissible. Appeal has no merits and consequently is rejected."
3. During the hearing before us Shri Chandra Sekharan, learned Advocate appearing for the appellants has stated that the appellant's case is covered by the decisions of the Tribunal reported in (i) 1985(21) ELT 901, (ii) 1983 ELT 1263, (iii) 1985(19) ELT 96, (iv) 1986(26) ELT 961 and (v) 1987(28) ELT 529 and following these decisions the present appeals filed by the appellants should be allowed. Arguing for the respondent Collector Shri Shishir Kumar, learned S.D.R. has stated that finished product (Acetate Yarn/Staple Fibre/Tow) are manufactured from the goods falling under T.I. 15A and not under Item 68. The goods falling under T.I. 15A are exempted from the whole of duty by other notifications. The benefit of Notification No. 201/79-C.E. is not, therefore, available to these goods.
4. We have considered the case records and arguments of the learned Advocate and learned S.D.R. We have also considered the decisions relied upon by the learned Advocate. In the case of Collector of Central Excise, Bhubaneswar v. Titaghur Paper Mills, reported in 1985(21) E.L.T. 901 (Tribunal), it is held by this Tribunal that a raw material is a material that is put into the manufacturing system to help the formation of the finished product. There is no authority to say that an input or raw material must go directly into the finished product. As long as it is consumed and utilised in a way that result in the production or manufacture of the article on which the system is engaged, it is a raw material and is an input for that finished product. If a substance or chemical is used and consumed in order to produce paper or to impart to it certain qualities and properties, it can be said that the chemical or substance was an input or a material in the manufacture of paper. In the light of the above proposition the Tribunal has held that lime, alum, salt cake and sulphamic acid were raw materials in the manufacture of paper and paper board and hence, the benefit of Notification No. 201/79-C.E. was admissible to these substances used and consumed in the manufacture of paper. In the decision reported in 1983 ELT 1263 (Collector of Central Excise, Nagpur v. Ballarpur Industries Ltd., Chandrapur), this Tribunal has held that Sodium Sulphate was used for the manufacture of sulphate pulp from which paper was produced. Unlike a catalytic agent it does not retain its identity while expediting the chemical process in the conversion of black liquor into white liquor. Hence, it is exempted from duty vide Notification No. 201/79 which exempts all excisable goods in the manufacture of which goods falling under Item 68 have been used to the extent of duty already paid on the goods described as inputs. In the case of Hindustan Lever Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1985 (19) E.L.T. 96 (Tribunal), the Tribunal has held that the term "inputs" has not been used in the Notification No. 201/79 in the ordinary sense of the term but as a term of reference to goods falling under Item 68 of the Central Excise Tariff used in the manufacture of other excisable goods. The term 'inputs' is one of wide scope and not of restricted or narrow scope. What the notification requires is that the Item 68 goods which we referred to as "inputs", are used in the manufacture of other excisable goods. In the decision of this Tribunal reported in 1986 (26) E.L.T. 961 (Tribunal) in the case of Carbon Industries (P) Ltd. v. Collector of Central Excise, Madras, this Tribunal held that "cartons" as packing container would be considered as an input as visualised in Notification No. 201/79 amended by Notification No. 105/82 and duty / paid on these 'cartons' would be eligible for set-off. In the case of Collector of Central Excise, Allahabad v. Hindustan Aluminium Corporation, Mirzapur, reported in 1987 (28) E.L.T. 529 (Tribunal), this Tribunal has held that for the purpose of set-off of duty under Notification No. 201/ 79-C.E. as amended by Notification No. 105/82-C.E. it is not necessary that raw material should be constituent of the final product. Utilization and consumption in the process of manufacture is enough. Therefore, the Tribunal has held that cryslite, aluminium, fluoride, borax and lime used in the manufacture of aluminium are eligible for set-off in terms of these notifications.
5. The Orders-in-original passed by the Assistant Collector shows that in the continuous process of manufacture of Acetate Yarn/Staple Fibre/Tow, the appellants have put in Acetaldehyde falling under Tariff Item 68 and Acetic Acid falling under the same Tariff Item as the starting raw materials. However, in the continuous process of manufacture, these two raw materials or inputs were converted into certain other finished products, one of which is Cellulose Acetate falling under Tariff Item 15A(1). Cellulose Acetate is the penultimate final product in the continuous process of manufacture prior to the stage of Acetate Yarn/Staple Fibre/ Tow. The lower authorities have denied the benefit of Exemption Notification No. 201/79-C.E., as amended, on the ground that final product, viz., Acetate Yarn/Staple Fibre/Tow, was manufactured out of cellulose acetate and since cellulose acetate falls under T.I. 15A(1), the benefit of exemption, according to them, was not admissible. We, however, do not find anything in the exemption notification to hold that inputs falling under T.I. 68 should form an integral part of the finished product, or that such raw material must go directly into the finished product. There is also no material before us to show that cellulose acetate, which arose as an intermediate product was cleared as such from the appellants' factory. In the circumstances, we are unable to subscribe to the view that the appellants did not use acetal dehyde and acetic acid falling under Tariff Item 68 in the manufacture of Acetate Yarn/Staple Fibre/Tow, but used cellulose acetate in the manufacture of the aforesaid final product. The claim of the appellants herein that they used the goods falling under Item 68 in the manufacture of Acetate Yarn/Staple Fibre/Tow falling under T.I. 18 and hence the benefit of Exemption Notification No. 201/79-C.E. is admissible to them, is supported by various decisions relied upon by the learned Advocate which have been discussed in paragraph 4 (supra).
6. In the light of our above discussions, we hold that the benefit of Notification No. 201/79-C.E., dated 4-6-1979 should be extended to the Acetate Yarn/Staple Fibre/Tow in the manufacture of which the appellants used Acetal Dehyde and Acetic Acid as starting raw materials, irrespective of the fact that in the continuous process of manufacture some other intermediate products arose which were not cleared as such from the factory but were converted into the final finished product falling under T.I. 18 in the continuous process of manufacture. Consequently, we set aside the impugned order and allow this appeal.