AI Drafter 
TaxTMI 
TaxTMI 
1990 (3) TMI 185
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.... Central Excise by his order-in-original NO. 1 to 5/T.I. 68/85, dated 2-1-1985 and confirmed the demand made in Notice Nos. 24/82, dated 4-12-1982, 6/83-84, dated 15-9-1986, 5/83-84, dated 12-9-1983, 18/83-84, dated 2-3-1984 and 5/84-85, dated 28-8-1984 issued by the Superintendent of Central Excise, Kesoram Rayon Range, demanding a total due of Rs. 10,29,602.91. The question that arises in this appeal is as to whether duty paid on PEG falling under Tariff Item 68 purchased from market by the appellants and used as a raw material for the manufacture of their product cellulose film is entitled for exemption under Notification No. 201/79-C.E., dated 4-6-1979. 2. The facts of the case are that the appellants are carrying out the manufacture....
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....-proofing is also treated with a solution containing melamine formaldehyde. The web is then dried with hot air on heated rollers and finally wound into rolls. 3. They have submitted that for the manufacture of their cellulose film, the softeners/plasticisers are essential raw materials/component parts. They have further submitted that the chemicals commonly used as softeners/plasticisers are those falling under the group of polyhydroxy alcohols of high hydroxyl to hydrocarbon ratio which are capable of inter-action with the cellulose chains and are also hygroscopic. The softeners used in the manufacture of cellulose films are glycerols and glycols and in their case they are using polyethylene glycol (PEG). It is their case that they purc....
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....he said cellulose film is not complete. The result of the chemical test, revealing the presence of PEG in the cellulose film, was also relied upon by the Assistant Collector in dropping the proceedings against them. 6. However, on appeal by revenue, the Collector (Appeals) reversed the order-in-original of the Assistant Collector and confirmed the demands raised in the show cause notices. The Collector (Appeals) observed that for eligibility of set off benefit, the condition precedent is that the input should be a raw material. The input should be duty-paid and finished product should be dutiable. In the instant case, the Collector found that the Glycol was used in a solution along with other ingredients "with the web of cellulose alread....
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....r us to place reliance on all the citations cited by him. We will content ourselves with the leading cases to examine the issue involved in this case. 11. In the case of Swadeshi Polytex Ltd. v. Collector of Central Excise as reported in 1989 (44) E.L.T. 794, the Supreme Court dealt with the use of duty paid Glycol and DMT in the manufacture of polyester film (man-made) and held that proforma credit under Rule 56A as applicable to set-off of duty under Notification No. 201/79-C.E. was applicable. It is further held that set-off was not deniable if non-excisable or fully exempted by-products, materials, waste or residue emerged at intermediate stage unless excess input is proved. The relevant observation at para 20 is noted below :- "I....
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....stries Ltd. as reported in 1989 (43) E.L.T. 804 (SC) again considered the set-off of duty of sodium sulphate as raw material used in the manufacture of paper even if sodium sulphate was burnt up and did not retain its identity in the end-product and held that it was entitled for exemption under Notification No. 105/82-C.E. In Collector of Central Excise v. Eastend Paper Industries Ltd. as reported in 1989 (43) E.L.T. 201 (SC), the court considered the question of use of wrapping paper used in manufacture of paper as raw material and held it to be entitled for exemption under Notification No. 18A/83-C.E. 13. The Tribunal in several cases as reported in Collector of Central Excise, Bhubaneswar v. Titaghur Paper Mills as reported in 1985 (2....