Customs, Excise and Gold Tribunal - Delhi
Straw Products Ltd. vs Collector Of Central Excise on 4 May, 1987
Equivalent citations: 1987(12)ECR504(TRI.-DELHI), 1987(30)ELT496(TRI-DEL)
ORDER M. Santhanam, Member (J)
This Appeal, which has been transferred to this Tribunal, from the East Regional Bench, is against the orders of the Collector (Appeals) dated 4-4-1983. The facts of the case briefly are as follows :-
1. The Appellants manufacture paper falling under Item No. 17, C.E.T. Their factory is at Jaykaypur, near Rayagada (Orissa). It is a composite unit comprising mainly of pulp mill and paper machine Section. For the preparation of pulp certain chemicals and other raw materials are used. The Appellants have several units in Bhopal which manufacture kraft paper and paper boards. Good quality pulp is needed for the manufacture. On some occasions the pulp is issued from Jaykaypur factory to Bhopal factory. The Appellants are claiming the benefit of Notification No. 118/75 in respect of the pulp sheets cleared. The local officers were of the view that proforma credit taken in respect of the duty paid inputs used in the manufacture of pulp sheets cannot be allowed and the credit already taken should be reduced by an amount which is equivalent to the duty paid on the inputs contained in the pulp sheets sent to Bhopal. On this order of the Asstt. Collector an appeal was preferred and the Appellate Collector was of the view that under Notification 201/79 it was necessary that the finished excisable product must pay duty so that the payment of such duty may be made from the proforma credit available with the assessee. The present Appeal is against the said order.
2. Shri Gopal Prasad, Consultant for the Applicants submitted that the movement of pulp sheets from 3aykaypur paper unit to another unit at Bhopal for paper board making should not have been considered to be a clearance of finished goods. He urged that the second proviso of Notification 201/79 would not be applicable because it referred to "the said goods" which were exempted from the whole of excise duty" and that would refer to the final product,.
3. Mrs. J.K. Chander, J.D.R., argued that the proviso of Notification 201/79 indicated that the notification would not apply if the said goods were exempted from the whole of excise duty thereon or chargeable to nil rate of duty. In this case the Appellants have availed of the Notification 118/75 for clearance of the pulp and the proviso would, therefore, be attracted.
4. For the purpose of clear understanding of the issues, it is necessary to refer to the relevant portion of Notification 201/79, dated 4-6-1979.
"... the Central Government hereby exempts all excisable goods (hereinafter referred 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) (hereinafter referred as "the inputs") have been used, from so much of the duty of excise leviable therein as is equivalent to the duty of excise already paid on the inputs.
Provided that the procedure set out in the Appendix to this notification is followed :
Provided further 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."
Notification 118/75 exempted goods falling under Item 68 manufactured in the factory had intended for use in the factory in which they are manufactured, or any other factory of the same manufacturer from the whole of duty of excise leviable thereon.
5. We will have to see whether on the facts of the case the two notifications could be applied. The Appellants have, admittedly, transferred dry pulp sheets to the Bhopal unit under Notification 118/75. So far there is no difficulty, even though pulp sheet is liable to duty under Item 68. The Appellants want the benefit of Notification 201/79 in respect of the inputs, namely the chemicals etc., used in the manufacture of pulp for the production of kraft paper and paper boards undertaken in the Bhopal unit. The Department has negatived the plea on two grounds. Firstly, that the proviso to Notification 201/79 would be applicable inasmuch as the Appellants had removed the pulp sheets without payment of duty, and they cannot claim the benefit for inputs. Secondly, that dry pulp sheet is a manufactured finished product cleared from Jaykaypur and intended to be used for the manufacture of paper and cannot be considered a semi-finished goods. In other words, the plea that it is an intermediary product was not acceptable.
6. We are of opinion that the contentions of the Department should be upheld. Both the Notifications 201/79 and 118/75 have to be read together in order to appreciate the controversy. The Appellants had availed the benefit of Notification 118/75 and have cleared pulp to their Bhopal factory. It was open to them to have paid duty under T.I. 68 and availed the benefit of 201/79 in respect of inputs, namely the chemicals. They have not done so. Having removed the pulp as such to the Bhopal factory, the Item 68 goods contemplated under Notification 201/79 would be the pulp and not the chemicals used in the manufacture of pulp. Notification 201/79 exempts excisable goods in which the Item 68 goods had been used, from so much of duty of excise leviable thereon as is equivalent to the duty already paid on the inputs. In the present case their input at the Bhopal factory is the pulp and not the chemicals. The lower authorities have relied on the proviso to Notification 201/79 to deny the benefit of the exemption. Of course, Notification 201/79 speaks of "the said goods" and in this case "the said goods" would be kraft paper and paper board. The denial of exemption on that ground may not be strictly correct. However, reading Notification 201/79 closely we are inclined to hold that Item 68 goods used in the manufacture of kraft paper is pulp and not the chemicals used for the preparation of pulp. In fact, there is an appendix and the procedure has been set out therein. Clause 1 of the Appendix shows that the manufacturer of the said goods shall give a declaration to the Superintendent of Central Excise having a jurisdiction over his factory indicating the full description of the goods intended to be manufactured in his factory and also the full description of the inputs intended to be used in the manufacture of the said goods. In this case, the Appellants having used the pulp as the input cannot turn round and say that the chemicals used in some other factory for the manufacture of pulp should be taken into consideration as the input. The other clauses in the Appendix prescribe that the inputs should be received in the factory and utilised in the factory and to the proper satisfaction of the officer concerned. The chemicals used in the manufacture of pulp were used in a different factory and not in the factory which manufactured "the said goods". In that view we hold that the benefit of Notification 201/79, dated '4-6-1979 would not be available to the Appellants. As rightly pointed out by the Collector if the Appellants had paid the duty for the raw materials used in the manufacture of pulp they could have taken a credit of the duty paid at this factory. Having failed to do so it is no longer open to them to say that the duty paid on the inputs, namely the chemicals should be exempted. In the result, the Appeal fails and is dismissed.