Cess on captively consumed intermediate paper products was upheld as leviable despite no market sale.

Cess under the Industries (Development and Regulation) Act was treated as a duty of excise governed by the Central Excises and Salt Act, 1944 and the Central Excise Rules. On that basis, cess was held leviable on ream wrapper paper even though it was an intermediate product captively consumed within the factory and not sold in the market. The levy measured by weight was also accepted as consistent with Section 9(1) of the Act. The challenge to levy on the captively consumed product therefore failed.

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Issues: Whether cess was leviable on ream wrapper paper used captively within the factory in the manufacture of other paper products.

Analysis: The levy of cess under the Industries (Development and Regulation) Act was treated as a duty of excise to which the Central Excises and Salt Act, 1944 and the Central Excise Rules applied. In the light of the controlling Supreme Court decision, cess was held leviable even on an intermediate product that was captively consumed and not sold in the market. The basis of levy by weight was also accepted as not offending Section 9(1) of the Industries (Development and Regulation) Act.

Conclusion: The cess was leviable on the captively consumed ream wrapper paper and the challenge failed.

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