1989 (8) TMI 81 - SC - Central Excise

Wrapping paper packaging for goods is a component of finished excisable goods and exempt under proviso to Rule 9(1)

SC held that wrapping paper used to render goods marketable qualifies as a component part of finished excisable goods and thus falls within the exemption ... Process incidental or ancillary to the completion of manufacture - wrapping paper as raw material or component part of finished goods - manufacture not complete until goods are made marketable - proforma credit / exemption for inputs consumed in manufacture - marketability as test for identifying 'goods' for excise dutyWrapping paper as raw material or component part of finished goods - proforma credit / exemption for inputs consumed in manufacture - Whether wrapping paper used by the respondents was to be treated as raw material or component part of the finished paper and therefore eligible for non-levy/exemption under the relevant notification and Rules. - HELD THAT: - The Court accepted the Tribunal's finding that the marketable unit of the paper products in question was the wrapped/packed ream and that wrapping in paper was an essential stage for the goods to be marketed. Applying established principles that excise attaches to manufacture of goods as known in the market, the Court held that any material which enters into and forms part of the process by which goods are rendered marketable must be treated as a raw material or component part of the end product. Reliance was placed on prior decisions explaining that processes incidental or ancillary to completion of manufacture are included within the concept of manufacture, and on authority holding that articles required to make goods marketable fall within 'manufacture'. On the facts the Tribunal had material to conclude that wrapping paper was so utilised and therefore the respondents were entitled to the benefit of the exemption/proforma deduction under the Rules and notification relied upon. [Paras 3, 4, 6]Wrapping paper was correctly held to be a component part/raw material used in the completion of the finished paper products and thus eligible for the claimed exemption; the Tribunal's acceptance of the manufacturer's contention was upheld.Process incidental or ancillary to the completion of manufacture - manufacture not complete until goods are made marketable - marketability as test for identifying 'goods' for excise duty - Whether the act of wrapping and allied processes form part of 'manufacture' for the purposes of imposing excise duty. - HELD THAT: - Drawing on this Court's precedents, the Court reiterated that 'manufacture' in excise law encompasses processes incidental or ancillary to bringing goods into existence as they are recognised in the market. Where a particular process is integrally connected with production such that completion for marketing would be commercially inexpedient without it, that process falls within manufacture. Applying these principles to the facts, the Court concluded that wrapping was an essential stage and therefore part of manufacture. [Paras 4, 6]Wrapping and allied processes are part of the process of manufacture where they are essential to render the goods marketable; the Tribunal's conclusion in this regard was affirmed.Final Conclusion: The appeals filed by the revenue were dismissed; the Tribunal's orders holding that wrapping paper used by the manufacturers formed part of the manufacture and entitled the respondents to the claimed exemption were upheld. Issues:1. Violation of Central Excise Rules regarding removal of wrapping paper without payment of duty.2. Interpretation of Rule 9(1), Rule 173 F, and Rule 173 G of the Central Excise Rules.3. Determination of whether wrapping paper qualifies as a component part or raw material for finished products.4. Application of excise duty on goods and the concept of manufacture in excise law.5. Consideration of processes incidental or ancillary to wrapping in the manufacturing process.6. Benefit of proforma credit under relevant notifications for exempting excise duty on specific goods.Analysis:1. The case involved appeals by the revenue under Section 35-L of the Central Excises and Salt Act, 1944, regarding the removal of wrapping paper without paying Central Excise duty, leading to a dispute between the appellants and respondents.2. The dispute centered around the violation of Rule 9(1), Rule 173 F, and Rule 173 G of the Central Excise Rules, with the respondents claiming exemption based on the captive consumption of wrapping paper as a component part of finished goods under the same Tariff Item.3. The Collector (Appeals) and Tribunal deliberated on whether wrapping paper, when used for making paper reams/reals, loses its identity and becomes a component part of the finished product, thus determining its eligibility for duty exemption.4. The judgment emphasized the concept of 'manufacture' in excise law, highlighting that excise duty is levied on goods that are new, distinct, and marketable, with the completion of manufacture including processes incidental or ancillary to wrapping.5. Referring to relevant case laws, the Tribunal upheld the manufacturer's contentions that wrapping paper qualifies as a raw material or component part of the end product, essential for making goods marketable and thus integral to the manufacturing process.6. The judgment also discussed the application of proforma credit under exemption notifications, drawing parallels with cases where components like nameplates were considered essential for making goods marketable, thereby qualifying for duty exemption.This detailed analysis of the judgment provides insights into the legal issues surrounding the violation of Central Excise Rules, the interpretation of relevant provisions, and the determination of wrapping paper's status as a component part in the manufacturing process, ultimately leading to the dismissal of the appeals based on the Tribunal's findings and established legal principles.