Full Judgment
2. Shri Nanak Chand, ld. JDR, reiterated the contentions made in the Appeal Memorandum. The respondents had requested for disposal of the matter on merits. In the Cross Objections filed by the Respondents the claim was made that following the meaning of inputs as given in the Chamber's 20th Century Dictionary Chemicals were capable of being covered under the term inputs. Since the value of packing has to be included in the assessable value, the packing material would also have to be held as inputs.
3. I have carefully considered the submissions made by the ld. JDR and the written submissions of the respondents.
4. The subject Notification was amended by Notification No.105/82-C.E., dated 28-2-1982. The amendment had the affect of curtailing the exemption given in this Notification. Whereas the criterion for the eligible inputs earlier was described as "excisable goods ... " in the manufacture of which any goods falling under ...
have been used." After the amendment the wording used was "exciable goods ... in the manufacture of goods any goods ... have been used as raw-materials or components parts." This distinction has been an important factor in the order of the Collector.
5. As far as packing in the form of boxes and containers is concerned, they could definitely not be termed as raw-materials or components parts. They were simple packing materials which could not be brought under the term "inputs". In fact, their eligibility in other provision such as proforma credit or Modvat credit was separately specified.
Thus, proforma credit under Rule 56A was available for inputs used for convenient distribution of the final goods also. In the Modvat Scheme in Rule 57A also packing materials have been given the status of inputs by way of deemed definition. This has been brought out in the judgement of the Tribunal in the case of Union Carbide Ltd. v. Collector of Central Excise, 1989 (43) E.L.T. 286 (Tribunal). In this judgement it was held that the packing film had not in any way been used in the production of torch batteries. It was held that the situation would remain so even after the amendment. The Collector's decision of extending the benefit for boxes and cartons could not draw any support from the language or interpretation of the Notification and, therefore, does not sustain.
6. As regards the chemicals the situation could be different. These chemicals as per the Appeal Memorandum were used for clearing the parts and, therefore, did not form the part of the finished product.
Raw-materials including consumables need not necessarily form part of the finished product. Those chemicals which were put into the process of manufacture but which were fully consumed during the process and were not visible in the final product can also benefit from this notification. In the judgement cited above, the Tribunal held that it was not necessary for an input to form part of the finished product as it finally emerged at the end of the manufacturing process, but as long as the inputs or raw-material is used up necessarily in the process that carries forward and furthers the process of bringing out and completing the manufactured product, the article or raw material was an input or a raw-material used in the manufacture of finished product. In the judgement in the case of Collector of Central Excise v. Ballarpur Industries Ltd. -1983 (13) E.L.T 1263 (CEGAT) sodium sulphate was given the benefit as input under this notification even when it was fully consumed in the manufacture of paper.
7. Accuracy is main essence of the watch. If parts are not fully cleared before assembly the very purpose of watch making would be defeated. Consequently, the chemicals which do the clearing job would qualify as a raw-material.
8. In the result, the appeal succeeds in part. It is held that cartons of boxes were not eligible inputs in terms of Notification No.201/79-C.E. but chemicals used for clearing watch parts during the process of manufacture of watches were so eligible.