Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Aruna Straw Boards (P) Ltd. on 22 April, 1988
Equivalent citations: 1988(17)ECC99, 1988(17)ECR423(TRI.-DELHI), 1988(36)ELT335(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. This is an appeal filed by the Collector of Central Excise, Guntur against the order of Collector of Central Excise (Appeals), Madras. The brief facts of the case are that the respondents manufactured paper boards falling under T.I. 17 of Central Excise Tariff. They manufactured single ply straw boards. While major portion of single ply straw boards was cleared as such, a portion of the same was used captively by the respondents for the manufacture of multipte ply straw boards in their factory and finally multiple ply straw boards so manufactured were removed from the factory after payment of duty. By issue of show cause notice the duty was demanded on the single ply straw boards captively consumed for the manufacture of multiple ply boards in their factory. The original authority however held infavour of the respondents and dropped the proceedings. The Collector of Central Excise, Guntur took up the matter in appeal before the Collector of Central Excise (Appeals), Madras who also held that no duty was chargeable on single ply straw boards captively consumed. His findings in this regard in paras 5 and 6 are reproduced below for ready reference :-
"5. During the relevant time the tariff description under entry No. 17 of Central Excise Tariff was as under:
"Paper and paper board, all sorts (including paste board, mill board, straw board, cardboard and corrugated board) and...
From the above description, it is clear that all sorts of paper boards including straw boards would fall under Tariff Item 17 and specifically would fall under Sub-item (1) (unless such straw board is elsewhere specified, which is not the case). Therefore, the tariff description does not distinguish between single ply and multiple ply straw boards and does not prescribed any standard of thickness, before a board could be called a straw board. Therefore, straw board whether it is single ply or double ply or triple ply or multiple ply would continue to be described as straw board and would fall under the same sub-item (1 )of Tariff Item 17 during the relevant period. Hence, charging single ply straw board to duty and again charging multiple ply straw board manufactured out of such single ply straw board sheets within the same factory to duty would clearly amount to double levy. On this short ground, application merits rejection.
6. As regards applicants' reliance on Explanation Clause (i) of Rule 9, what is contemplated is the use of excisable goods as such in the factory of production and not use of further manufacture of a different excisable article "as such" would mean use of the article for the purpose for which it is intended, like installation of an air-conditioner in the same factory in which it is manufactured, or as respondents point out, use of bagasse as fuel in a sugar factory which produces bagasse. Therefore, the plea of the applicant that single ply straw board used to obtain multiply straw board by pasting single ply sheets together, is not using single ply board as such, as contemplated in the Explanation Clause (i) of Rule 9 and applicant's arguments in this regard have no force."
Against the above finding of the Collector of Central Excise (Appeals), the Collector of Central Excise, Guntur has come up for an appeal in this appeal. The learned JDR for the Department Shri A.S. Sunder Rajan has pleaded that the single ply straw boards changed into multiple ply straw boards which is a commodity different from single ply straw boards. Therefore in terms of this Tribunal decision in the case of Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise, Calcutta and Ors. reported in 1986 (24) ELT 542 (Tribunal), the multiple ply straw boards and single ply straw boards being distinct and separate commodity are required to be charged the duty separately subject to the benefit of any exemption available in terms of Rule 56A or otherwise. He drew our attention to the Main Heading of the Tariff Heading 17 which is reproduced below :-
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"Tariff Item No. Description of goods
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17 PAPER AND PAPER BOARD, ALL SORTS, (including paste-
board, millboard, strawboard, cardboard and corrugated board) AND ARTICLES THEREOF SPECIFIED BELOW, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power -
(1) Paper and paper board, (including paper or paper boards which have been subjected to various treatments such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified.
(2) * * * *
(3) * * * *
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He pleaded that the appellant are making paste boards from the ply straw boards. He was asked by the Bench to amplify the definition of paste boards. He cited the definition of the same given in IS: 4661 -1968. He read out the definition and for the convenience of reference the same is reproduced below :-
"Paste Board _ Board produced by pasting two or more formed papers with an adhesive in a subsequent operation as distinct from the material produced by pressing together in wet state without the use of an adhesive."
It was pointed out to him that this definition of paste boards contemplated the pasting of a paper on the board for the purpose of making a paste board and not pasting together of single ply straw board. The learned advocate for the respondents pleaded that in terms of Sub-rule (4) of Rule 49 of Central Excise Rules, the goods could be removed without payment of duty for the manufacture of other excisable goods in the same factory when both the inputs excisable goods and final excisable goods fall under the same subheading under Tariff. In this connection he mentioned that both the single ply board and the multiple ply board fall under Tariff Item 17(1) and therefore duty could only be charged on the final product manufactured and cleared by them.
2. We observe that both the single ply and multiple ply boards answer to the description of straw boards and multiple ply straw boards cannot be considered as paste boards even in terms of the definition given in the ISI cited by the Revenue. No evidence has been produced before us that the straw board made by pasting together single ply straw boards is anything other than straw board. The Revenue has cited the Five Member Bench decision of the Tribunal in the case of Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise, Calcutta and Ors., reported in 1986 (24) ELT 542 (Tribunal). In this decision the question for consideration was whether the laminated paper produced by laminating two layers of kraft paper with polythene and also bituminised laminated paper manufactured out of duty paid kraft paper was again chargeable to duty. The Tribunal has held that the laminated products produced amounted to manufacture of a new product and therefore bituminised laminated kraft paper was chargeable to duty. The findings of the Tribunal in this regard in para 23 is reproduced below for the convenience of reference:-
"23. Shri Arora, appearing in the appeal of M/s. United Paper Products contended that bituminising process carried out by his clients did not amount to manufacture as would invite imposition of excise duty. In support of this contention, he relied on the decision of the Madras High Court in the case of Kwality Coated Products 1980 ELT 579 (Madras) and that of the Andhra Pradesh High Court in the case of Standard Packaging 1985 (20) ELT 314 (A.P.). He contended that these judgments related to bituminised paper itself, and, therefore, in the absence of any judgment to the contrary by any other High Court, we are bound to follow the said decisions and grant relief to his clients. But in considering these arguments we have to take into consideration the judgment of the Supreme Court in the Empire Industries case, which had been rendered subsequent to the above said two decisions. No doubt the judgment of the Supreme Court did not deal with bituminised paper, but the observations in the said judgment as to whether any particular process would amount to manufacture, have been considered earlier in this judgment. It had been seen that judged by the tests laid down by the Supreme Court in the said judgment, the process of laminating two layers of paper with an adhesive between the two in order to manufacture a new commodity, known differently under a distinct name, and meant for distinct use, would amount to manufacture of a new distinct excisable commodity. Judged by the said test the process of bituminisation being carried out by M/s. United Paper Productsj/vould also amount to manufacture of a new excisable commodity i.e., bituminised paper, the process of bituminisation being carried out in order to impart additional qualities, such as strength and impermeability to water. Therefore, though the two decisions relied on by Shri Arora may have been with reference to bituminised paper, the conclusion in the said judgments cannot hold good subsequent to the decision of the Supreme Court cited supra, for the reasons more fully stated even earlier."
We observe the similar question of levy of duty on bituminised kraft paper came up for consideration before the Hon'ble Bombay High Court in the case of Union of India v. Babubhai Nylchand Mehta, Bombay reported in 1988 (33) ELT 292 (Bombay). The Hon'ble Bombay High Court has ruled that bituminised kraft paper was not liable to Central Excise duty. The Hon'ble High Court after taking the note of the judgment of the Hon'ble Supreme Court in the case of Empire Industries Ltd. and Ors. v. Union of India reported in 1985 (20) ELT 179 (S.C.) has held in para 5 of their judgment as under :-
"5. Shri Lokur then submitted that Item 17(2) of the Schedule to the Act clearly provides that forty per cent ad valorem duty shall be levied on all kinds of paper, including paper which have been subjected to various treatments such as coating, impregnating, corrugation, creping etc. It was urged that as the respondents had undertaken the process of coating and impregnating the kraft paper, the liability to pay excise duty under Item 17(2) cannot be avoided. The submission is not correct. Item 17 and 17 part (2) reads as under:
"17. Paper and paper board, all sorts (including pasteboard, millboard, strawboard, cardboards and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.
(1)...
(2) Paper board and all other kinds of paper Forty % Ad velorem (indcluding paper or paper boards whichhave been subjected to various treatments such as coating, impregnating, corrugationcreping and design printing) not elsewherespecified."
The mere perusal of this item makes it clear that the liability arises in relation to manufacture of paper and for which any process is ordinarily carried on with the aid of power. It is not in dispute that the respondents carry out the process of coating and impregnating with the aid of power, but Shri Sadhe, learned counsel appearing on behalf of the respondents, very rightly submitted that these processes are carried out not in relation to the manufacture and that being the principal requirement of impost of levy under Item 17(2), the mere fact that process of coating and impregnating is carried out cannot attract levy of duty. The liability to pay duty arises because of manufacture of paper and it is not in dispute that the respondents do not manufacture any paper but purchase kraft paper from the open makret. The process carried out by the respondents on such kraft paper does not amount to manufacture, and therefore, Item 17(2) is not attracted to the work undertaken by the respondents. In our judgment, the view taken by the learned Single Judge does not suffer from any infirmity as to warrant interference in this appeal."
In view of the judgment of the Hon'ble Bombay High Court the decision of the larger Bench cited by the Revenue is not binding. We observe that no contrary judgment, to that of Hon'bte Bombay High Court in the case of bituminised kraft paper has been cited before us by the Revenue. We in the circumstances are bound to follow the decision of the Hon'ble Bombay High Court for the purpose of coming to our finding in the present case. It is seen from the decision of the Hon'ble High Court that once kraft paper has suffered duty no further duty can be charged after it is laminated by using bitumen. In the present appeal before us the Revenue has seek (sic.) to levy duty on single ply straw board and at the same time they have also collected duty on the multiple straw board manufactured from single ply straw board cleared by the assessee. In terms of the ratio of the decision of the Hon'ble Bombay High Court in case duty was collected on the single ply straw boards the Revenue is not entitled to collect duty on the multiple ply straw board. In the present case the single ply boards are pasted to form multiple ply boards and the resultant product is also straw board. In view of the decision of the Hon'ble High Court duty can be collected only at one of the two stages. The respondents have already paid duty on the multiple board the question of charging duty on the single ply board does not arise.
3. We observe that the respondents have cited Rule 49(4) read with Rule 9 in support of their plea that in case excisable raw materials are used in the same factory for manufacturing of two excisable goods falling under the same Tariff Item, no duty can be charged on the input raw materials. We observe that the relevant provision of the Rule 9 came into effect from 9-7-1983 and the demand in the present case has been raised for the period from 20-3-1983 to 22-7-1983. The benefit of this rule will be available to them during the period from 9-7-1983 to 22-7-1983. The rule provides that no excisable goods shall be removed from the place of production inter alia for the manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid in the manner prescribed. The Rule is subject to several provisos. The third proviso inserted by Central Excise Notification No. 187/83, dated 9-7-1983 is relevant for the present purpose. It reads as follows :-
"Provided also that such goods may be removed without payment of duty leviable thereon, if they are consumed or utilised in the place where such goods are produced or manufactured or any premises appurtenant thereto so specified under this sub-rule, either as raw material or as component parts for the manufacture of any other commodity which -
(i) is excisable goods specified by the Central Government by notification under Sub-rule (1) of Rule 56A.
(ii) falls under the same item number in the First Schedule to the Act as such goods so consumed or utilised fall under, and
(iii) is neither exempt from the whole of the duty of excise leviable thereon nor is chargeable to nil rate of duty."
The respondents are eligible for the benefit for Single ply boards used for the manufacture of multiple ply board in terms of the proviso to Rule 9 sub-paras (ii) and (iii) as above, also for the period after 9-7-1983
4. In view of the discussions above, we find no merits in appeal of the Revenue and dismiss the same..
S.D. Jha, Vice-President (J)
5. From Brother Gulati's order I observe that single ply and multiple ply boards are both straw boards. In view of this I would not for the present like to say that effect of the Bombay High Court decision in Union of India v. Babubhai Nylchand Mehta 1988 (33) ELT 292 (Bombay) is to unsettle the Tribunal decision in Guardian Plasticote Ltd. case 1986 (24) ELT 542. The product in two stages not being distinct in name, character or use there could be no question of demanding duty at both the stages. In this view of the matter the applicability of Rule 49(4) and Rule 9 discussed by Brother Gulati in para 3 of his order is also in my view of academic importance. With these words I agree with Brother Gulati that the appeal should be dismissed.
6. I agree with the view of the Vice-President (J).