1985 (3) TMI 295 - AT - Central Excise

Tribunal rules screw caps on Horlicks bottles not excise duty inputs

COLLECTOR OF CENTRAL EXCISE, CALCUTTA Versus HMM. LTD.

COLLECTOR OF CENTRAL EXCISE, CALCUTTA Versus HMM. LTD. - 1985 (22) E.L.T. 810 (Tribunal) Issues Involved:1. Whether screw caps used on Horlicks bottles qualify as inputs under Notification No. 201/79-C.E.2. Whether screw caps are component parts of the finished product, Horlicks.3. Interpretation of 'excisable goods' under Item 1B of the Central Excise Tariff.4. Applicability of previous judgments and notifications to the current case.Issue-wise Detailed Analysis:1. Whether screw caps used on Horlicks bottles qualify as inputs under Notification No. 201/79-C.E.:The Collector of Central Excise (Appeals) held that screw caps used on Horlicks bottles manufactured by M/s. HMM Limited were inputs in terms of Notification No. 201/79-C.E. The Collector reasoned that the packing of Horlicks in bottles was incomplete unless capped, and materials used in bringing a substance to the excisable stage could be considered inputs. The learned Counsel for the department argued that screw caps could never be component parts or ingredients of Horlicks, citing various High Court decisions to support this view. The Tribunal found that none of the cited cases directly addressed whether a metal screw cap formed a raw material or component part of contents like Horlicks.2. Whether screw caps are component parts of the finished product, Horlicks:M/s. HMM Limited argued that the metal screw caps used on Horlicks bottles should be considered raw materials or component parts of the finished product, qualifying for exemption under Notification No. 201/79-C.E. They contended that the product falls under Item 1B, CET, which includes 'prepared or preserved foods put up in unit containers and ordinarily intended for sale.' The Tribunal, however, found this argument fallacious, stating that the excisable goods are the Horlicks, not the container or its parts. The Tribunal emphasized that the screw cap did not contribute to the completion of the Horlicks as a finished product but was merely a packaging element.3. Interpretation of 'excisable goods' under Item 1B of the Central Excise Tariff:The Tribunal clarified that Item 1B covers prepared and preserved foods, and the goods to be taxed are the prepared foods, not the containers. The Tribunal noted that the container's role is to preserve the food, but it does not make the container a component of the food itself. The Tribunal reiterated that the excisable goods under Item 1B are the Horlicks, not the unit package containing it.4. Applicability of previous judgments and notifications to the current case:The Tribunal reviewed various judgments and notifications cited by both parties but found them irrelevant to the specific issue of whether a metal screw cap forms a raw material or component part of Horlicks. The Tribunal noted that the previous cases dealt with different contexts and did not directly address the current dispute. The Tribunal emphasized the need to decide the contention based on the specific materials and facts of the present case.Separate Judgment by G. Sankaran:G. Sankaran dissented from the majority opinion, arguing that the screw caps should be considered component parts of the excisable goods under Item 1B. He noted that the excisable goods under Item 1B are 'prepared or preserved foods put up in unit containers and ordinarily intended for sale.' He argued that the unit container, including the screw cap, is an integral part of the excisable goods. He concluded that M/s. HMM Limited should be entitled to the benefit of Notification No. 201/79-C.E.Conclusion:The majority opinion set aside the Appellate Collector's order, denying M/s. HMM Limited the concession under Notification No. 201/79-C.E. The appeal filed by the Collector of Central Excise, Calcutta, was admitted, and the Tribunal ruled that the screw caps did not qualify as raw materials or component parts of the finished product, Horlicks.