Incidental packing as part of manufacture: jute pack sheets and twine used for export baling were not subject to excise duty.

Normal and minimum packing required to make jute manufactures marketable was treated as incidental or ancillary to manufacture, so jute pack sheets and jute twine used for baling and packing exported goods under bond were regarded as used in the manufacturing process. On that basis, the packing materials fell within the relevant export-bond and exemption provisions, including the exemption for jute twine consumed in the factory for manufacture of jute manufactures. An alternative view also treated the pack sheets, when stitched around the goods, as forming a jute bag-like article used in the manufacture of a jute product. Duty on the packing materials was therefore not sustainable.

---

---

Issues: Whether central excise duty was payable on jute pack sheets and jute twine used for baling and packing jute manufactures exported out of India under bond.

Analysis: Normal and minimum packing necessary to make a manufactured product marketable was treated as part of the manufacturing process and not as a separate, independent activity. Jute manufactures were ordinarily exported only after baling, and the pack sheets and twine used for such baling were therefore used in an incidental or ancillary process to the completion of the final marketable product. On that footing, the materials used for baling and packing satisfied the requirement of use in manufacture under the relevant provisions and also fell within the exemption for jute twine consumed in the factory for manufacture of jute manufactures. An alternative view was also accepted that the pack sheets themselves, when stitched around the goods, formed a jute bag-like article and were thus used in the manufacture of a jute product exported under bond.

Conclusion: The demand for duty on the packing materials could not be sustained and the appeal of the Department failed.

Final Conclusion: Excise duty was held not payable on the jute pack sheets and jute twine used for normal packing and baling of the exported jute manufactures, and the impugned demand was set aside.

Ratio Decidendi: Normal and minimum packing necessary to make goods marketable is a process incidental or ancillary to manufacture, so materials used for such packing are treated as used in manufacture for the purpose of export bond and exemption provisions.

---