1. Appeal under Section 35B of the Central Excises and Salt Act, 1944 praying that in the circumstances stated therein, the Tribunal will be pleased to set aside the order C. No. V/17/42/82 dated 24-8-1982 of the Appellate Collector of Central Excise, Madras.
2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri S.K. Choudhury, Senior Departmental Representative for the appellant and upon hearing the arguments of Shri K. Srinivasamurthy, Advocate for the respondent, the Tribunal makes the following order : 3. This is an appeal filed by the Department against the aforesaid order of the Appellate Collector of Central Excise, Madras. The brief facts leading to the appeal may be set out as follows : - 4. The Assistant Collector of Central Excise, Warangal Division, in de novo adjudication proceedings as directed by the Appellate Collector of Central Excise, Madras, found that certain quantities of wrapping paper used for purposes of packing other varieties of paper in the factory of M/s. Bhadrachalam Paper Board Ltd., were not entitled to the benefit of the procedure contained in Rule 56 A of the Central Excise Rules, 1944; he observed that no new product emerged after paper is wrapped, and wrapping is not a process incidental or ancillary to the completion of the finished product and hence no new manufacture is involved in the act of wrapping other varieties of paper with wrapping paper; he also found that for purposes of Rule 56A packing is not for a more convenient distribution of the finished product; he, therefore, found that the respondent was not eligible to avail of proforma credit under Rule 56A in respect of the wrapping paper used for wrapping other varieties of paper. When the matter was raised in appeal with the Appellate Collector of Central Excise, that Collector observed that wrapping is for the convenient distribution of the other varieties of paper and hence proforma credit under Rule 56A should be available to the respondent. He, therefore, set aside the order C. No.V/17/30/5/82-MP. I dated 26-4-1982 of the Assistant Collector, vide his order referred to in para 1. The present appeal of Collector of Central Excise, Hyderabad is against this order of the Appellate Collector.
5. The learned Senior Departmental Representative took us over the wording of Rule 56A and observed that under Sub-rule (2), three types of goods can be brought into the factory under a claim for proforma credit namely, The object of bringing the above three categories of goods is for, (i) the manufacture of excisable goods or (ii) for more convenient distribution of finished product.
The term 'finished product' is distinguishable from the term 'finished excisable goods' produced by the manufacturer and referred to in the rule subsequently. A finished product is brought into the factory for purposes of more convenient distribution of itself and not of other excisable goods (referred to as finished excisable goods). In the present case wrapping paper is not brought for purposes of its more convenient distribution. In thus referring to the more convenient distribution of other varieties of paper (e.g. finished excisable goods in this case), the Appellate Collector has mis-directed himself.
6. So far as manufacture is concerned he claimed that packing is not a process of manufacture vide the decision of His Lordship Justice Shri J. Koshal of Madras High Court in the case of E.I.D. Parry Ltd. v.Union of India (1978 E.L.T. J 18). In para 6 of the Judgment His Lordship has observed, "So it has to be decided whether packing of the fertilizer lying in stock with the petitioners can be regarded as a process incidental or ancillary to the completion of the manufactured product. In my opinion packing cannot be so regarded. The expression "Completion of the manufactured product" would in my opinion mean subjection of a product which though answering to the description of the name by which it is sold in the market but is yet in a crude form to processes would include those meant for purification, colouring and otherwise beautifying the end product. But then such processes must be limited to the process of manufacture properly so called." He also referred to the following observations of Their Lordships of the Andhra Pradesh High Court in the case of Andhra Pradesh Paper Mills Ltd. v. Assistant Collector of Central Excise and Ors., 1983 ELT 86 (A.P.) : - (Para 12). - "...Thus, the process of packing other kinds of paper with the wrapping paper really constitutes a post manufacturing process of other kinds of paper. It cannot be said that the use of the wrapping paper for packing other kinds of paper forms part of the process of manufacturing other varieties of paper." As wrapping paper is not brought either for the completion of manufacture of other paper, or for its own more convenient distribution, the provisions of Rule 56A will not apply.
7. The learned counsel for the respondent, however, referred to the broad structure of Rule 56A and claimed that its object is to avoid payment of duty twice on the same product. He incidentally referred to the decision of the Andhra Pradesh High Court in the case of Andhra Pradesh Paper Mills Ltd. v. Asstt. Collector of Central Excise and Ors., 1983 ELT 86 (A.P.). In para 17 of the Judgment Their Lordships have observed that once wrapping paper has been assessed to excise duty as wrapping paper prior to the use for packing or wrapping other varieties of paper, it does not constitute manufacture and the value of the same cannot be the same as subjected to excise duty as forming part of the value of the package containing other dutiable paper. If proforma credit under Rule 56A is not permitted the spirit of this Judgment will not be carried out.
8. After the conclusion of arguments in this case, the Supreme Court's decision regarding the scope of Sec. 4 of the Central Excises and Salt Act, 1944, with particular reference to the inclusion of cost of packing in determining assessable value of an excisable product has been announced. The Supreme Court has held that Sub-section 4(1) (4) (d) (i) which includes cost of packing for purposes of valuation is good law. We also observe that the object of manufacturing wrapping paper is for its eventual use in packing; once it is so used, it cannot be said that the possibility of inclusion of the value .of packing in the assessable value of other excisable goods is tantamount to assessment of wrapping paper by itself once over; nor is there any ban or inhibition in the levy of duty on goods more than once. What is not acceptable is the assessment of the same goods to duty under the same tariff entry twice over-and that is not the position in the present case.
9. The wording of Rule 56A is clear that it is intended to cover certain finished products to enable their more convenient distribution.
It is common ground that wrapping paper in the present case is used not for its own convenient distribution but for the distribution of other varieties of paper. In this view of the matter we find that the order of the Appellate Collector is contrary to the provisions of Rule 56A.Accordingly we allow the appeal, set aside the order of the Appellate Collector and restore the order C. No. V/17/JO/5/82-MP. I dated 26-4-82 of the Assistant Collector.