Supersnacks Pvt. Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. the appellants bring m.g. poster paper and glassien paper falling under sub-heading 4802.99 as an input, a packing material for their final produce biscuits manufactured by them. before m.g. poster paper and glassien paper are used as a packing material for biscuits these are required to be printed and waxed. for this process they send the m.g. poster paper and glassien paper to a paper converter and bring the same back for their ultimate use in the packing of biscuits manufactured by the appellants. therefore, they applied to the departmental authorities under rule 57-f(2) of the central excise rules, 1944 and later to the collector of central excise for removing the said inputs (m.g. poster paper and glassien paper) for the necessary processing as mentioned above and receiving them back in their factory before their use for the purpose of packing their final product. in response to this request dated 29-9-87 the learned additional collector vide his order dated 19-5-1988 has informed the appellants as follows: "the matter has been examined at this end. m.g. poster paper and glassien paper do not fall within the definition of inputs (packing material) for the manufacture of biscuits, as mentioned in rule 57-a. hence, no modvat credit is admissible on the said paper." 2. it is against the aforesaid order of the additional collector that an appeal has been filed now. the learned consultant for the appellants has urged that rule 57-a(1) clearly includes packaging material within the scope of term 'inputs' referred to in the said rule for which modvat credit is admissible. he further points out that exclusion clause in the explanation to the said rule does not cover the instant packaging material used by them. the learned consultant submits that the impugned order passed by the addl. collector does not refer at all to the reasons as to why the appellants could not get modvat credit for the packing material obtained by them. this packing material can also be sent for processing before its use in the final product. hence, he prays that the appeal may be allowed. learned jdr reiterates what has been stated in the impugned order, although he admits no reasons had been given in the impugned order as to why the m.g. poster paper and glassien paper do not fall within the definition of inputs in the face of clause (b) of the explanation to rule 57-a.3. i have carefully considered the pleas advanced on both sides. i agree with the learned consultant's plea that the addl. collector's order does not give any reason. on the prima facie reading of rule 57-a it is clear that all types of packaging materials are included within the scope of terms 'inputs' as given in clause (b) of the explanation to rule 57-a except those mentioned in clauses (ii) and (iii) in the exclusion clause of the said explanation. since no reasons have been given by the addl. collector of central excise as to why the packaging material received by the appellants could not be treated as inputs, the appeal is allowed by way of remand subject to the verification that the appellants' packing material does not fall within the category of packing material cited in clauses (ii) and (iii) of the exclusion clause of the said rule. in case the appellants' packing material is not covered by (ii) and (iii) of the aforesaid exclusion clause the appellants should be extended the benefit of modvat credit with consequential relief, if any.

Judgment:
1. The appellants bring M.G. Poster Paper and Glassien paper falling under sub-heading 4802.99 as an input, a packing material for their final produce biscuits manufactured by them. Before M.G. poster paper and Glassien paper are used as a packing material for biscuits these are required to be printed and waxed. For this process they send the M.G. poster paper and Glassien paper to a paper converter and bring the same back for their ultimate use in the packing of biscuits manufactured by the appellants. Therefore, they applied to the departmental authorities under Rule 57-F(2) of the Central Excise Rules, 1944 and later to the Collector of Central Excise for removing the said inputs (M.G. poster paper and Glassien paper) for the necessary processing as mentioned above and receiving them back in their factory before their use for the purpose of packing their final product. In response to this request dated 29-9-87 the learned Additional Collector vide his order dated 19-5-1988 has informed the appellants as follows: "The matter has been examined at this end. M.G. Poster paper and Glassien paper do not fall within the definition of inputs (packing material) for the manufacture of Biscuits, as mentioned in Rule 57-A. Hence, no Modvat credit is admissible on the said paper." 2. It is against the aforesaid order of the Additional Collector that an appeal has been filed now. The learned consultant for the appellants has urged that Rule 57-A(1) clearly includes packaging material within the scope of term 'inputs' referred to in the said rule for which Modvat credit is admissible. He further points out that exclusion clause in the explanation to the said rule does not cover the instant packaging material used by them. The learned consultant submits that the impugned order passed by the Addl. Collector does not refer at all to the reasons as to why the appellants could not get Modvat credit for the packing material obtained by them. This packing material can also be sent for processing before its use in the final product. Hence, he prays that the appeal may be allowed. Learned JDR reiterates what has been stated in the impugned order, although he admits no reasons had been given in the impugned order as to why the M.G. poster paper and Glassien paper do not fall within the definition of inputs in the face of Clause (b) of the explanation to Rule 57-A.3. I have carefully considered the pleas advanced on both sides. I agree with the learned consultant's plea that the Addl. Collector's order does not give any reason. On the prima facie reading of Rule 57-A it is clear that all types of packaging materials are included within the scope of terms 'inputs' as given in Clause (b) of the explanation to Rule 57-A except those mentioned in clauses (ii) and (iii) in the exclusion clause of the said explanation. Since no reasons have been given by the Addl. Collector of Central Excise as to why the packaging material received by the appellants could not be treated as inputs, the appeal is allowed by way of remand subject to the verification that the appellants' packing material does not fall within the category of packing material cited in clauses (ii) and (iii) of the exclusion clause of the said rule. In case the appellants' packing material is not covered by (ii) and (iii) of the aforesaid exclusion clause the appellants should be extended the benefit of Modvat credit with consequential relief, if any.