TMI Blog1994 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... o avail credit of the duty paid on paper bags used in relation to packing and manufacture of cement cleared from the factory of the pectitoners under Rule 57A of the Central Excise Rules, 1944. 4.In Writ Petition No. 12924 of 1994, the petitioner has sought for the issuance of a writ of certiorarified mandamus by calling for the records of the third respondent, relating to the order No. 520/92, dated 7-10-1992, to quash the same and to direct the respondents to permit the credit of duty under Rule No. 57A of the Central Excise Rules on paper bags used as packing materials in the manufacture of cement. 5.Facts which are considered necessary for the disposal of these writ petitions briefly stated are the following : The petitioners are a Company incorporated under the Companies Act, 1956 and the petitioners are engaged in the manufacture of various categories of cement, which are classified under Chapter 25 of the Central Excise Tariff Act, 1985. A duty of excise is levied under Section 3 of the provisions of the Central Excises and Salt Act, 1944 on the cement manufactured and cleared. The goods falling under Chapter Heading 2502.29 attract duty at Rs. 330 per tonne, by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication is that per ton consisting of 20 bags each weighing 50 kgs of cement will be delivered. Either the wholesale trader or the common consumer accepts cement to be delivered only in bagged condition. The petitioners do not deny that it is possible to say that the cement can be marketed in naked condition, but that will relate to a further very limited and isolated segment of consumer. The petitioners on a very few occasions in the distant past, sold bulk cement in naked condition to Kerala State Electricity Board during the year 1988, where the customer had specialty built silo at site and arranged for special type of carriers or wagon to collect naked cement ex-factory and had arranged wagon movement to the construction site. Such category of sale is so exceptional and its very nature so cumbersome and commercially non-viable for considering it as a marketing practice. It is stated that packing is fundamentally and integrally necessary to protect the cement from disintegration, as it is hydroscopic in character. Bulk cement cannot be stored except in fully protected specially built silos and it can hardly be suggested that any wholesaler will have such silos to buy and marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse orders had the effect only for the limited period 10-3-1988 to 15-11-1988. However, by Notification No. 64/94, dated 1-3-1994, the exemption granted to paper bags was taken away and the petitioners are buying paper bags incurring duty of excise on their receipts and again the issue is of grave implication to the economies of manufacture and sale. 8.The main consideration on which the authorities rejected the claim of the pectitioners was that Rule 57A of the Rules visualises input used in or in relation to manufacture of cement and since cement was known to have marketability in naked condition, paper bags cannot be considered to have been used in the manufacture of cement. According to them, cement was complete the moment it was put in the silo. The packing operation involving drawal of cement from silo, being filled up in paper bags and delivered to the wholesale stream of trade from the packing house was considered to be a post-manufacturing operation. 9.It is the further case of the petitioners that the stand of the Revenue is not compatible with the provisions of the Act and the Rules. although the revenue itself has no definite stand or fixed assessment practice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. Even outside Tamil Nadu, the entire Eastern as well as Northern region the MODVAT facility for use of HDPE sacks is allowed. It is unfortunate that the petitioners are isolated in the hostile practice of discrimination in respect of the credit facility in the packing unit. 11.On the other hand, Mr. K. Jayachandran, learned Additional Central Government Standing Counsel contended that the paper bags cannot be construed as inputs used in or in relation to the manufacture of element. According to him, the use of paper bags is post-manufacture element. Hence, the authorities have rightly negatived the claim of the petitioners. However, he did not dispute that in the State of Tamil Nadu itself the MODVAT facility is available in almost all the remaining cement units in regard to the use of paper bags. He also contended that the paper bags are excluded from `inputs'. 12.In view of the contentions of the learned counsel for the parties on facts and similar circumstances of these cases on hand, the only point that arises for consideration is whether the petitioners can be allowed credit of any duty or additional duty paid on the cement bags entitled for utilising the credit so al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the expression " goods used in or in relation to the manufacture of the said final products, (hereinafter referred to as the `inputs') in Rule 57A. Wide connotation should be given to the words "in relation to'. Explanation to Rule 57A clearly shows of an inclusive definition of the term `inputs'. The inclusive definition, as observed by the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha (AIR 1960 S.C. 610) denotes, explanation, but not restriction in any sense. While dealing with inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation. In the same decision, it is further held that final product cosmetics and toilet preparations being not marketable unless packed in containers, containers treatable as component part of the final product and held that containers in such situation have to be considered as integral part of the final products. After elaborate consideration on various aspects, the Division Bench of this Court, following the Supreme Court Judgments has stated that it is settled law that even if two views are possible, the view favourable to the assessee has to be followed. In my opinion, this deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture, what is to be seen is as to how the goods are generally sold. In the case of cement, it is a matter of common knowledge that it is mostly used in bags. Even in the cases on hand, though the cement was sold in naked state i.e. otherwise than in paper bags is less when compared to the total quantity of cement sold in bags. Paragraph 14 of the aforesaid Judgment of the Supreme Court advances the case of the petitioners in this regard. In the decision in Collector of Central Excise v. Eastend Paper Bags Industries Ltd., (77 S.T.C. 203), it was held that manufacture includes incidental or ancillary process. In that case, the question was whether wrapping paper was eligible as a raw material. It was held that the goods manufactured were paper packed and wrapped in paper and that it was essential for the goods to be marketable, to be wrapped in paper. The processes incidental or ancillary to wrapping were to be included in the process of manufacture, and manufacture in the sense of bringing the goods into existence as those were known in the market is not complete until those were wrapped in wrapping paper. Similarly, in the cases on hand, it is an essential requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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