1985 (4) TMI 300 - AT - Central Excise

Essential materials in paper manufacturing qualify as inputs for tax benefits

COLLECTOR OF CENTRAL EXCISE, BHUBANESWAR Versus TITAGHUR PAPER MILLS

The Tribunal upheld the decision of the Appellate Collector of Central Excise, Calcutta, determining that lime, salt cake, sulphamic acid, and alum ... - Issues involved: Interpretation of Notification No. 201/79-C.E. regarding eligibility of certain materials as inputs in the manufacture of paper and paperboard.Summary:The Asstt. Collector of Central Excise, Cuttack Division, initially ruled that lime, alum, salt cake, and sulphamic acid were not eligible for benefits under Notification No. 201/79-C.E. The Appellate Collector of Central Excise, Calcutta disagreed and directed that the appellants should avail set-off benefits for these materials if fully consumed internally in paper making. The Tribunal upheld the Appellate Collector's decision, emphasizing that these materials qualify as inputs in paper manufacturing despite being intermediate products.The Tribunal rejected the argument that the term 'inputs' introduced by a subsequent notification would alter the eligibility criteria.Regarding the specific materials in question, the Tribunal considered lime, salt cake, sulphamic acid, and alum as inputs in paper manufacturing based on their roles in the production process. For instance, lime is used to make bleach liquor, which is essential in paper production, while salt cake aids in the recovery of caustic soda for treating pulp. Sulphamic acid improves paper quality by reducing pulp fiber degradation, making it a crucial ingredient.Alum was deemed an input when used to treat water directly involved in paper manufacturing. However, alum used in treating effluent water outside the factory precincts was not eligible for the benefit under the notification.The Tribunal emphasized that modern paper production involves various processes and chemicals to enhance paper quality, rejecting the notion that only materials physically embodied in the final product qualify as inputs. Chemicals and substances that contribute to the desired properties of paper are considered inputs in the manufacturing process.In conclusion, the Tribunal directed the central excise to extend the benefit of Notification No. 201/79-C.E. to materials like lime, salt cake, sulphamic acid, and alum when consumed in paper manufacturing, while excluding substances like alum used solely for treating effluent water.