Separate cess on captively used sacking cloth rejected where cess had already been paid on the finished bags.

Separate cess was not payable on captively consumed sacking cloth used to manufacture bags where cess had already been discharged on the bags cleared. Applying the Jute Manufactures Cess Rules, 1976 under the Industries (Development and Regulation) Act, 1951, the Tribunal followed its earlier view that the statutory scheme did not permit a second cess demand on the intermediate product when the final product had already suffered cess. The department's attempt to distinguish the relevant period was rejected, and the demand was held unsustainable.

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Issues: Whether cess was payable separately on sacking cloth captively consumed in the manufacture of bags when cess had already been paid on the bags cleared.

Analysis: The dispute concerned levy of cess under the Jute Manufactures Cess Rules, 1976 framed under the Industries (Development and Regulation) Act, 1951. The deciding principle was that where hessian and sacking were captively used for manufacture of bags and cess had already been discharged on the bags cleared, there was no warrant for a separate cess demand on the intermediate sacking cloth. The reasoning followed the earlier Tribunal view applying the same statutory scheme and rejecting the department's attempt to distinguish the period involved.

Conclusion: Separate cess on the captively consumed sacking cloth was not payable and the demand could not be sustained.

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