Marketability and component part test: screw cap on bottled Horlicks qualified for excise exemption under the notification.

A screw cap used on Horlicks bottles was treated as a component part for excise exemption purposes because it was necessary to make the product marketable in the form contemplated by the tariff entry. Notification No. 201/79-C.E. allowed relief where duty had already been paid on inputs used as raw materials or component parts, and the cap was not regarded as a mere accessory separate from the finished goods. The principle applied was that an item essential to complete manufacture and saleability may qualify for exemption or set-off under the notification.

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Issues: Whether the metal screw cap used on bottles of Horlicks was a component part or input entitled to exemption or set-off under Notification No. 201/79-C.E.

Analysis: Notification No. 201/79-C.E. exempted excisable goods to the extent duty had already been paid on inputs falling under Tariff Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 used as raw materials or component parts. The relevant tariff entry covered prepared or preserved foods put up in unit containers and ordinarily intended for sale. On that basis, the product became marketable only when packed in containers, and the screw cap used for sealing and saleability of the bottle could not be treated as a mere accessory divorced from the finished product. The reasoning followed the principle that an article essential to complete the process of manufacture for a marketable product may qualify for the benefit of the notification.

Conclusion: The screw cap was a component part of the finished product and the assessee was entitled to the benefit of Notification No. 201/79-C.E.

Ratio Decidendi: Where an item is necessary to render goods marketable and to complete the product in the form in which the tariff entry contemplates sale, that item may be treated as a component part or input for the purpose of exemption or proforma credit under the relevant excise notification.

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