2007 (9) TMI 480 - AT - Central Excise

Summary

Issues: Interpretation of the term "consumption" in Notification No. 10/96-C.E. dated 23-7-1996 for excise duty exemption.

In this judgment, the main issue revolves around the interpretation of the term "consumption" as used in Notification No. 10/96-C.E. dated 23-7-1996 for excise duty exemption. The appellant argues that the metal containers they manufactured and used for filling Soya oil within their premises should be considered as consumed in the manufacturing process, thus qualifying for the exemption. On the other hand, the revenue contends that the metal containers, though exempted goods, are not actually consumed in the manufacturing process but only used for packing, leading to a duty liability upon clearance. The crux of the matter lies in whether the term "consumption" necessitates the loss of physical identity of the goods used in the manufacturing process.

The appellant's case hinges on the interpretation of "consumption" within the factory of production as stated in the notification. They assert that the metal containers, being used for packing the Soya oil manufactured on-site, qualify for exemption under Notification No. 10/96. Conversely, the revenue argues that "consumption" should entail the loss of physical identity of the goods, citing a judgment from the Madras High Court to support their stance. The High Court's decision in Associated Pharmaceutical Industries (P) Ltd. v. The State of Tamil Nadu is referenced, where it was held that items retaining their identity after use, such as bottles in the context of filling drugs or syrups, cannot be deemed consumed in the manufacturing process.

A significant aspect of the judgment involves contrasting interpretations of "consumption" in different legal precedents. The Tribunal refers to a previous case, Mihijam Vanaspati Ltd. v. CCE, Jamshedpur, where it was held that "consumption" should be equated with "use," allowing tin containers used for packing vegetable oil to qualify for exemption under a similar notification. This decision contrasts with the Madras High Court's ruling, prompting a deeper analysis. The Tribunal also cites the Supreme Court's decision in Union of India v. V.M. Salgaoncar and Brothers (P) Ltd., emphasizing a broader interpretation of "consumption" in fiscal law, which includes any utilization of the commodity even if it retains its identity post-use.

After considering the arguments and legal precedents, the Tribunal finds that the appellant has established a prima facie case for waiving the duty and penalty imposed under the impugned order. Consequently, the Tribunal directs that the appeal proceed without the need for pre-deposit of duty and penalty during its pendency, thereby disposing of the stay application in favor of the appellant.