1. This is an appeal under Section 35-B(2) of the Central Excises and Salt Act, 1944, filed by the Asstt. Collector of Central Excise, Dn.
Chandrapur at Nagpur against the order No. 1038/NG-71/82 dated 27-7-1982 of the Appellate Collector of Central Excise, Bombay under which he has allowed the first appeal of M/s Ballarpur Industries Ltd., and permitted them to avail of proforma credit of duty on sodium sulphate under item 68 which is used by M/s Ballarpur Industries Pvt.
Ltd., in the manufacture of paper in their factory. The Asstt.
Collector has been authorised to file this appeal by the Collector of Central Excise, Nagpur. The learned departmental representative for the appellants has contended that sodium sulphate for which the credit of duty has been claimed is used in converting black liquor into white liquor. It is thus used for regeneration of spent chemical and not used directly in the manufacture of paper. It has also been argued that sodium sulphate is used in the recovery section of the mills to obtain white liquor. The black liquor is converted into white liquor by addition of sodium sulphate and firing the mixture in the recovery boiler. Thus sodium sulphate is used for processing of white liquor and not directly for the manufacture of paper. The learned departmental representative has therefore, contended that it cannot be treated as an input under Notification No. 201/79, dated 4-6-1979 as amended and therefore, the benefit of the duty paid on sodium sulphate under item 68 cannot be given to the duty payable on paper manufactured by M/s.
Ballarpur Industries Ltd. The departmental representative has therefore, submitted that the order of the Appellate Collector of Central Excise is incorrect and that the same should be set aside and the order of the Asstt. Collector denying the credit should be upheld.2. The learned Advocate for the respondents has opposed the submissions. He has described the three methods for manufacture of pulp and stated that the sulphate process is the most commonly used and economical for the purpose of making pulp and for making paper therefrom. He has stated that the respondents also have the same sulphate process in their factory for manufacture of pulp and paper therefrom. He has explained that sodium sulphate is an essential chemical required for processing white liquor which is necessary for pulping process in the respondents' factory. He has referred to dictionary of terms used in the paper. Printing and Allied Industries by Gerard H. Lafontaine to show the different processes for making pulp and the advantages of manufacturing paper through the sulphate process of pulping. He has re-emphasised that the use of sodium sulphate is necessary in the respondents' factory to produce better quality of paper. Coming to the Notification No. 201/79, dated 4-6-1979, he has drawn our attention to the wordings of the Notification and argued that it exempts all excisable goods on which the duty of excise is leviable and in the manufacture of which any goods falling under item 68 have been used to the extent of duty already paid on the goods described in the Notification as inputs. The learned Advocate has further contended that this Notification has to be interpreted in the same way as the term 'manufacture' is defined under Section 2(f). He has emphasised that the definition of 'manufacture' in the Parent Act must prevail in interpreting the same word used in the Notification. He has farther argued that the Notification No. 201/79, dated 4-6-1979 was amended by Notification No. 105/82, dated 28-2-1982, but this amendment was prospective and it was not clarificatory in nature. The amendment would therefore, come into force only from the date of issue and it could not apply to the case under appeal. The learned Advocate has relied on the Supreme Court's Judgement in the case of M/s Hemraj Gordhandas v. The Asstt, Collector of Central Excise and Customs and Ors.-1978 E.L.T.(J-355) to show that the intention is not relevant in interpreting the statute and that the statute should be interpreted on the basis of plain text. Applying the ratio of this Judgement to the present case, the learned Counsel has submitted that there is no warrant to read Notification 201/79, dated 4-6-1979 to say that the exemption would apply to inputs only. He has further relied on the High Court's Judgement in the case of Cannanore Spinning and Weaving Mills Ltd, v.the Collector of Customs and Central Excise and Ors., 1978 E.L.T. 375 to urge that the amendment brought about by Notification No. 105/82, dated 28-2-82 would apply prospectively from that date only. The Advocate has finally contended that in case the Tribunal feels that the interpretation of the Notification 201/79 dated 4-6-1979 is not very clear and there is ambiguity in language, then the benefit of doubt should go to the assessee as per the ratio of the Bombay High Court's Judgement in the case of Haldyn Glass Works Pvt. Ltd. v. M.L. Badkwar, 1980 E.L.T. page 291. For the aforesaid reasons, he has submitted that the appeal filed by the Asstt. Collector of Central Excise, Chandrapur Dn. is not tenable and that the same should be dismissed.
3. We have examined the submissions of the appellant and the respondents. The main question before us is the correct construction of Notification 201/79, dated 4-6-1979. It is seen that the same is interpreted by the Asstt. Collector of Central Excise, Dn. Chandrapur to mean the benefit thereunder could be given to only those excisable goods which are used as inputs in the manufacture" of any excisable goods. We find this interpretation does not follow from strict construction of the Notification. The Notification exempts all excisable goods in the manufacture of which goods falling under item 68 have been used to the extent specified in the notification. For the sake of convenience goods used in the manufacture of exempted goods are referred to as inputs. Thus, it is not correct to interpret this notification to the effect that the exemption thereunder would be available only if the goods are used as inputs. In the present case, sodium sulphate is used for the manufacture of sulphate pulp from which paper is produced in the factory of the respondent. Unlike a catalytic agent which retains its identity while expediting the chemical process, sodium sulphate in question loses its identity totally and is consumed in the manufacture of paper as seen by us above. There is therefore, no doubt that sodium sulphate is used for the manufacture of paper and there is no justification in the Asstt. Collector of Central Excise, Chandrapur, interpreting that sodium sulphate should go directly into the manufacture of paper. We further find that the definition of manufacture under Section 2(f) includes any process incidental or ancillary to the completion of a manufactured product. Therefore, when even incidental and ancillary processes have been included in the definition of manufacture, there would be no justification for excluding an essential process from the aforesaid definition. We further accept the learned Advocate's Shri Hidayatullah's contention that the term 'manufacture' in Notification No. 201/79, dated 4-6-1979 has to be interpreted on the basis of its definition in the parent statute. This being so we are satisfied that sodium sulphate is used in the manufacture of paper in the respondents' factory. Accordingly, we find that there is no merit in the appeal filed by the Asstt. Collector of Central Excise, Dn. Chandrapur and we dismiss the same.