1. In this appeal filed by the Revenue, the issue for our consideration is, whether the benefit of Notification No. 201/79-CE dated 4.6.1979 is available in respect of the duty paid on the inputs for the printing ink when the printing ink itself enjoyed exemption from duty and was used for printing the aluminium foils to make them printed aluminium foils. The Assistant Collector of Central Excise, Thane, had taken a view that the raw materials- (1) Butanol (2) Ethyl Acetate (3) Acetone (DMK)(4) MIBK and (5) Butyl Acetate, were not used as solvents in printing ink. He referred to the amendment by notification No.105/82-CE dated 28.2.1982 in notification No. 201/79-CE and observed that only raw materials which were forming components or parts of finished product were eligible for the credit. He held that since the above named solvents were not forming part of the finished product, in this case Aluminium Printed Foils, no credit was allowable under notification No. 201/79-CE in respect of the duty paid on such solvents. On appeal, the Collector of Central Excise (Appeals) dismissed the matter on limitation without going into the merits of the case. The assessee filed a writ petition in the Bombay High Court and the Bombay High Court observed as under: The appeal being dismissed on the technical ground of limitation, it would be better if it is disposed of on merits by the Collector of Central Excise (Appeals).
The Collector of Central Excise (Appeals), Bombay, took up the matter in pursuance of the High Court's directions and came to a view that the five solvents, named above, were necessarily raw materials in the manufacture of aluminium foil printed. He added that the aluminium foil was printed with the use of the printing ink and was known as printed aluminium foil only after it was so printed with such printing ink. He also referred to the Tribunals decisions and held that in the facts and circumstances of the case, the solvents, named above, were eligible inputs in terms of notification No. 201/79-CE.2. We have heard Shri Satnam Singh, SDR, for the appellants/Revenue.
Shri Section Ganesh with Shri Thomas Joseph, advocates, represented the respondents.
3. Shri Satnam Singh, SDR, referred to the order-in-original and submitted that the printed ink in this case enjoyed exemption and the aluminium foils would be marketed as plain foils or as printed foils.
It was his contention that the solvents were not the raw materials or component parts of the printed aluminium foils.
4. Shri S. Ganesh, advocate, referred to the order-in-appeal and pleaded that a correct view has been taken by the appellate authority.
He referred to the relevant notifications and cited a number of decisions in support of his contention that the exemption to the printing ink will not take away the benefit of set off under notification No. 201/79-CE when undisputedly the solvents in question had been used for the printing of the foils through the exempted printing ink. He also referred to the trade notice issued by the Central Board of Excise and Customs and pleaded for rejection of the Revenue's appeal.
5. We have carefully considered the matter. We find that the respondents were bringing duty paid raw materials which have been named in the order passed by the Assistant Collector of Central Excise, Thane. These raw materials were used in the manufacture of printing ink which during the relevant time was classifiable under item No. 68 of the erstwhile Central Excise Tariff. For the goods classifiable under Item No. 68, there was an exemption Notification No. 118/75-CE dated 30.4.1975 which provided exemption to all goods falling under Item No.68 when they were used in the factory of manufacturer. When the use was elsewhere, then the requirement of falling the Chapter X Procedure under the Central Excise Rules, 1944 was prescribed. In this case the printing ink was only used captively. This printing ink was used captively for printing the aluminium foil to make them printed aluminium foil.
6. The only ground on which the benefit had been denied by the adjudicating authority was that the solvents did not form part of the aluminium printed foils. We find that this aspect had been discussed in detail by the Collector of Central Excise (Appeals), Bombay, who had held that the solvents in question form part of the final product. The operative part of his order is reproduced below: In the instant case, printing ink is manufactured by use of the five solvents mentioned in the earlier part of this order. This ink is further used in the printing of the various details in the aluminium foil. The aluminium foil becomes printed only when the particulars are printed with the use of this ink which is manufactured out of the solvents under dispute. In this view of the matter, the proper view is that these five solvents under dispute are necessarily raw materials in the manufacture of aluminium foil printed. In effect the aluminium foil is printed with the use of the printing ink and is known as printed aluminium foil only after it is printed with this printing ink. This printing ink is to be manufactured with the above five solvents under dispute. In other words, the five solvents under dispute are to be treated as raw materials in the manufacture of printed aluminium foil. The decisions of the CEGAT are squarely applicable in this case and the Assistant Collector has erred in treating the above said solvents as not forming part of the final product.
7. The learned advocate had referred to the Tribunal's decision in the respondent's own case vide order No. 1637/91/WRB dated 30.8.1991, wherein the Tribunal had taken a view in similar circumstances that the raw materials for the manufacture of printing ink were eligible for modvat credit when the exempted printing ink produced out of these solvents was used in printing the aluminium foil. Para 7 from that decision is extracted below: 7. Now coming to the legal aspect, we are on the question of interpretation of the terms 'intermediate product' used in Rule 57D vis-a-vis 'final product' used in Rule 57C. The undisputed factual position is that the respondents' final product inter alia includes printed aluminium foil. For obtaining this final product, plain aluminium foil obtained by rolling aluminium ingots/billets and also printing ink are identifiable as inputs going into the manufacture.
Though the line of manufacture of plain foils is different, which has to be obtained independent of the line of manufacture, of printing ink, both are products which are in the nature of essential inputs for printed aluminium foils. Hence, in such a case, where the final product is obtained by combining two or more inputs manufactured in the same factory and thereafter subjecting them to process of manufacture of final product, each such product, has to be regarded as a product occurring at the intermediate stage in the line of manufacture of final product - namely printed aluminium foil. Printing ink also goes in to the stream of manufacture of final product - printed foil. It is also an essential component of printed foil, hence, in such a case, both plain toils as also printing ink are to be regarded as intermediate products, which are to be obtained in the course of manufacture of printed foil. The same view is found to be reflected in the Trade Notice No. 21/90 dated 6.3.1990 issued by the Collector of Central Excise, Bombay-I, (cited by the learned advocate) wherein the Department have allowed modvat benefit in respect of inputs used in the preparation of caustic soda lye. (Excepted for captive use as per the same Notification) which in turn is used in the manufacture of paper.
Hence, we are of the view that provision of Rule 57C cannot be attracted in this case and the case falls within the purview of Rule 57D. We, therefore, reject the appeal from the Department and confirm the order of Collector (Appeals) on this issue.
8. Reference has also been made to a number of other decisions wherein it had been held that the benefit of credit was not deniable if the duty paid inputs passed through the exempted intermediate goods for the manufacture of final products.
9. In the case of Collector of Central Excise v. DCW Ltd. , it had been observed that the benefit of modvat credit was available when the inputs were utilised in the manufacture of PVC Resins - declared final products, through intermediate products - caustic soda flakes. In the case of Jain Spun Pipe Co. v. Collector of Central Excise , it had been observed that the cement spun pipes could not be manufactured without wire and that the wire produced by the appellants out of re-rollable material received by them as inputs would constitute an intermediate product in the manufacture of cement spun pipes. The Tribunal held that the modvat credit would be admissible on re-rollable materials used by the assessee as inputs for the production of wire which was used as intermediate product in the manufacture of cement spun pipes (para 7 of the decision refers). Similar observations have been made by the Tribunal in the case of Collector of Central Excise v. IDL Chemicals Ltd. 6. We have considered the arguments advanced by both the sides. We find that the present appeals have proceeded on an entirely misdirected course by laying undue emphasis on the expression 'packaging materials' occurring in the Explanation Clause under Rule 57A. An endeavour had been made to treat the blow moulded tubes and lay flat tubing as packaging material and that the modvat scheme extends the benefit only to the duty paid on the packaging materials themselves subject to the restrictions contained in the Explanation Clause and not to the raw materials thereof. We do not agree with this view. The scheme of Rule 57A is that credit of duty is available in respect of the duty paid on the goods used in or in relation to the manufacture of the final products. This is the cardinal principle underlying the admissibility of the modvat benefit. Only, for the sake of convenience and as an abbreviation, the expression 'input' has been used in Rule 57A to refer to the goods used in or in relation to the manufacture of the final products. In the Explanation Clause, the scope of the expression 'input' has been spelt out both by an inclusion clause and an exclusion clause. Actually, the exclusion clause does not use the word excluding but uses the antonym stating "does not include". As far as the inclusive part of the Explanation is concerned, the items sought to be included are: (a) inputs which are manufactured and used within the factory of production in or, in relation to the manufacture of final products, and In Sub-clause (b), packaging materials find an expression and thereby the present problem. The purpose of incorporating an inclusive definition in a statute is well explained in various judicial pronouncements. Thus, it has been mentioned in the Law Lexicon by Honourable Justice T.P. Mukherjee that the word 'include' is a word of enlargement, which is generally used in definitions and interpretation clauses in order to enlarge the meaning of the words and phrases occurring in the body of the statute, and when it is so used, the words and phrases must be considered as covering not only such things as they signify according to the natural import, but also those things which the interpretation clause declares that they shall include. Applying the above principle, the purpose of including packaging materials in the scope of the expression 'inputs' is not to do away with the normal meaning of the expression 'input' which, as stated above, would cover goods used in or in relation to the manufacture of the final product, but to add to them, the packaging materials also. This would be the correct legal position in case there was any difficulty in extending the benefit to packaging materials. The specific inclusion would take care of such a situation and bring within the scope of modvat credit packaging material also. But that does not mean, as stated earlier, that the benefit to goods which are used in or in relation to the manufacture of the final product in the present case are not available. It is an undeniable fact that the plastic granules are used in the manufacture of the blow moulded tubes and the lay flat tubing which are then used in the manufacture of the explosives.
There is no doubt at all that the plastic granules can be said to be used in the manufacture of explosives notwithstanding the passage through the stage of the tubings. The fact that the lay flat tubing or blow moulded tubes happen to be exempted would not affect the position because it is nobody's case that they are cleared from the factory as such. They continue to be used in the manufacture of final products, explosives. Further, Rule 57D adequately covers the situation.
10. In the light of the above decisions and the facts and circumstances of this case, we consider that the view taken by the learned Collector of Central Excise (Appeals) does not suffer from any infirmity and he has taken a correct view in the matter. We do not find any merit in this appeal filed by the Revenue and the same is rejected.