1987 (12) TMI 278 - AT - Central Excise

Cello poly film not considered raw material for battery packing under notification 201/79-CE

The judgment concluded that the cello poly film used for packing batteries did not qualify as an input or raw material under notification 201/79-CE. The ... Set-off of duty - Inputs Issues:- Interpretation of notification No. 201/79-CE regarding exemption for excisable goods.- Determining whether cello poly film used for packing batteries qualifies as an input or raw material.- Consideration of alternative plea for proforma credit under Rule 56A of the Central Excise Rules.Analysis:1. The appeal involved the interpretation of notification No. 201/79-CE, which provides exemption for excisable goods based on the use of certain inputs. The appellant, M/s. Union Carbide, argued that cello poly film used for packing batteries should be considered an input as it is essential for the completion and sale of the battery.2. The appellant contended that the batteries could not be cleared or reach the market without the strip packing using cello poly film. They argued that even after an amendment in February 1982, the film should be classified as a raw material and component part of the battery.3. The appellant cited various judgments to support their case, emphasizing the importance of the film in the production and clearance of the finished product.4. The appellant also referred to the notification as a set-off notification and cited additional judgments to strengthen their argument.5. In the alternative plea, the appellant requested proforma credit under Rule 56A of the Central Excise Rules if the exemption under notification 201/79-CE was not granted.6. The respondent, representing the department, argued that the cello poly film used for packing batteries did not qualify as an input or raw material. They highlighted that the film was not listed in Rule 56A and did not directly contribute to the manufacturing process of the battery.7. The respondent referred to Section 2(f) of the Central Excises and Salt Act, 1944, to distinguish processes incidental to manufacturing and contended that the film packing was not an integral part of the battery production.8. The respondent emphasized that the film did not enhance the character of the batteries, citing a Supreme Court judgment to support their argument.9. The respondent rebutted the appellant's claim that batteries could not be sold without the film pack, stating that batteries are frequently sold without such packaging.10. The judgment highlighted the necessity for an input or raw material to be used and consumed in the manufacturing process of the finished product. It emphasized the scientific understanding of inputs and raw materials in manufacturing processes.11. The judgment reiterated that inputs and raw materials must directly contribute to the creation of the finished product and not merely serve to protect or secure it.12. A critical sentence from the judgment emphasized the integral connection of a process with the production of goods to determine if materials used in that process qualify as part of the manufacturing process.13. Referring to a Supreme Court observation, the judgment emphasized that processes directly related to actual production fall within the scope of 'in the manufacture of goods.'14. The judgment concluded that the cello poly film used for packing batteries did not qualify as an input or raw material as it was not directly related to the actual production of the batteries but served a protective function.15. The judgment rejected the appeal, stating that the film did not meet the criteria to be considered an input or raw material under notification 201/79-CE.16. The judgment left the option open for the appellant to pursue a claim under Rule 56A for credit, subject to meeting all necessary conditions and requirements as per the Central Excise Rules.