Incidental packing as manufacture: wrapping paper used inside the factory qualified for exemption under the pulp-based notification.

Wrapping paper made from pulp and used inside the factory to wrap reels and reams of paper was treated as material used in further manufacture, because normal minimum packing necessary to market the finished goods is incidental or ancillary to manufacture. On that footing, the Tribunal extended Notification No. 62/82, which exempts paper and paper board produced from pulp and used within the factory for further manufacture of paper or paper board on which duty is leviable, to the wrapping paper in question. The Revenue's appeal therefore failed, and the exemption was allowed.

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Issues: Whether wrapping paper produced from pulp and used within the factory for wrapping reels and reams of paper manufactured by the assessee was used for further manufacture of paper or paper board so as to qualify for exemption under Notification No. 62/82 dated 21.2.82.

Analysis: The notification exempted paper and paper board produced out of pulp and falling under Item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944, if used within the factory of production for further manufacture of paper or paper board on which duty was leviable. The wrapping paper was not treated as mere packing in the sense of a separate, unrelated use. The principle applied was that normal minimum packing without which the finished product could not be marketed is incidental or ancillary to completion of the manufactured product. The Tribunal held that this principle extended to the present case, and that wrapping paper used for wrapping the other varieties of paper before clearance from the factory was used in the further manufacture of paper.

Conclusion: The wrapping paper was eligible for exemption under Notification No. 62/82, and the Revenue's appeal failed.

Ratio Decidendi: Normal minimum packing necessary to make the manufactured goods marketable is an incidental or ancillary process of manufacture, and material used for such packing can satisfy a notification requiring use within the factory for further manufacture.

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