- (1.) This appeal, under Section 35-L (b) of the Central Excise and Salt Act, 1944, arises out of and is directed against the Order No. E/1351/88-C dated 2-12-1988, by the Customs, Excise and Gold (Control) Appellate Tribunal, (Tribunal) New Delhi, allowing the appeal preferred by the Respondent and holding that Respondent was entitled to certain proforma credits of the duty paid on "Sodium Sulphate" used in the manufacture of paper and paper-boards in which respondent is engaged. The short point for consideration in this appeal is whether the Respondent-Manufacturer,-The Ballarpur Industries Ltd., -was entitled to the benefit of Central Government's Notification No. 105/82-CE, dated 28-2-1982 a question which in turn, depends on whether Sodium Sulphate could be said to have been used as "Raw-Material" in the manufacture of 'paper' and 'paper-board'. In the proceedings before the authorities, the dispute initially concerned, six other inputs. But the controversy before us was limited, as it should rightly be, only to Sodium Sulphate inasmuch as even in the appeal before the Collector (Appeals), the department's grievance, apparently, was confined to the Pro forma-Credits of duty earlier paid on Sodium Sulphate (See Col. 6 of the Assistant Collector's Memorandum Appeal dated 15-7-1987 before the Collector (Appeals)).
(2.) Respondent is a manufacturer of paper and paper-boards in the processes relating to which "Sodium Sulphate" is used "in the chemical recovery cycle of Sodium Sulphide which forms an essential constituent of Sulphate cooking liquor used in the digestion operation". The notification dated 28-2-1982 under which the credit is claimed reads: "In exercise of the power conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, and in supersession of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 178/ 77-Central Excise, dated 18 June, 1977, the Central Government hereby exempts all excisable goods (hereinafter referred as "the said goods") on which the duty of excise is leviable and in the manufacture of which any goods failing under Item No. 68 of the First Schedule to the Central Excise and Salt Act. 1944 (1 of 1944) (hereinafter referred as the input,") have been used as raw material or component parts (hereinafter referred to as "the inputs") from so much of' the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the "inputs' (Emphasis supplied) The Superintendent of Central Excise, Range-2, Yamunanagar, declined the Pro forma Credit to the duty paid on "Sodium Sulphate" on the ground that Sodium Sulphate "was burnt-up in the process of manufacture and was not retained in the paper" and that. therefore, it could not be considered "Raw-Material" in the manufacture of paper. Accordingly, he caused a notice dated 18-1-1983 to be issued requiring respondent to show cause why the amounts of Pro forma Credit availed of by the respondent for the period between 28-2-1982 and 31-10-1982 should not be recovered. The reason why "Sodium Sulphate" could not be held to be a "raw material" in the manufacture of paper was set out in the notice thus : "..........The Pro forma Credit claimed and granted in respect of the above mentioned items from 28-2-82 to 31-10-82 is not admissible because these Chemicals are burnt out and do not remain in the finished product. The amount of pro forma credit availed is, therefore, liable to be recovered ..........." (Emphasis supplied) However, the Assistant Collector of Central Excise, Ambala, by his order dated 27-6-1986 took a different view and held that Sodium Sulphate, even as the other inputs referred to in the said notice, was an essential raw material in the manufacture of paper and attracted the benefit of the notification. The show cause notice dated 18-1-1983 was, accordingly, set aside. But, the Collector of Central Excise (Appeals) set aside the order of the Assistant Collector and remitted the matter to Assistant Collector for a readjudication. The respondent-manufacturer challenged this order' before the Tribunal. The Tribunal upheld the contention of the Respondent-manufacturer, set aside the order of the Collector (Appeals) and restored the order of the Assistant Collector. The Tribunal adopted the reasoning in its earlier decision in Seshasayee Paper and Boards Ltd. v. Collector of Central Excise (1985) 22 ELT 163 in which the Tribunal had held: "........the term raw material" has to be interpreted in the circumstances of each case in. the absence of any acceptable or useful definition of the term either in the dictionary or in the technical literature ........" "..........sodium sulphide, lye. Sodium Sulphate, Daicol (Gaur Gums) and Fluo solid lime used for the bleaching of pulp should be considered as raw materials in the manufacture of paper; they serve a distinct and definitive purpose in the normal and recognised process of manufacture of paper and are essential for the process of manufacture ........." In this appeal, the Collector challenges the correctness of the decision of the Tribunal.
(3.) We have heard Sri A. K. Ganguly, learned Senior Counsel for the Appellant and Sri Soli Sorabjee, learned Senior Counsel for the Respondent-Manufacturer. The thrust of' Sri Ganguly's arguments is that the amplitude of the expression "Raw-Material" in the Notification has to he ascertained with reference to and in the context of the purpose in substituting that expression in place of the words obtaining in the earlier Notification No. 79/ CE dated 4-6-1979, in which credit was given to duty paid on "goods" which have been "used" in the manufacture of excisable goods. Sri Ganguly says that the Tribunal has, virtually and in effect, ignored the essential and important distinction between goods being "used" in the manufacture on the one hand and "goods" used as "Raw-Material" on the other, ignoring the conscious change intended by the substitution of the expression "Raw-Material" in the latter notification dated 28-2-1982 which was clearly intended to cut-down the benefit. Sri Ganguly referred to the following observations of this Court in Collector of Central Excise v. Eastend Paper Industries Ltd. (1989) 43 ELT 201 (SC): In J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer (1965) 16 STC 563 : (AIR 1965 SC 1310), this Court while construing the expression 'in the manufacture or processing of goods for sale' in the context of sales tax law, though the concept is different under the Excise Law, has held that manufacture of goods should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods ......." (P. 204) (Emphasis Supplied) and contended that the import of the word "Raw-material", judicially accepted, connotes something more than what is 'used' in the manufacture and requires that goods to become "Raw-Material" must, either in their original or altered form, endure as a composite element of the end-product. Sri Ganguly submitted that the technical literature and evidence in the case as to the part played by Sodium Sulphate in the chemical technology of paper making suggested two things : First, that Sodium Sulphate was utilised in the preparation of an anterior, intermediate product at the stage of 'digestion' of the pulp and did not, therefore, strictly belong to the process of manufacture of paper itself, and, Secondly, that Sodium Sulphate did not go directly into and find a place in the finished product and did not, therefore, qualify for being "Raw-Material" in the manufacture of paper. Learned Counsel said that no satisfactory answer to the question raised in the appeal could be afforded unless a clear line of demarcation between the material merely used in the manufacture of paper on the one hand and material used as "Raw-Material" on the-other is drawn. Sri Ganguly sought to substantiate this distinction in the present Case with reference to certain observations of this Court in Deputy Commr. of Sales Tax, Board of Revenue v. Thomas Stephen and Co. Ltd. (1988) 1 JT631 : (AIR 1988 SC 997). One of the questions there was whether cashew-shells used in the kiln by the dealer who was a manufacturer of tiles, terra-cotta-ware and cerarmic items were exigible to purchase-tax under Section 5A (1)(a) of the Kerala General Sales Tax Act, 1963, on the ground that the dealer had "consumed such goods in the manufacture of other goods". The Tribunal had held that cashew-shells had been used only as fuel in the kiln for the manufacture of tiles and that, therefore, the condition of 5A (1)(a) of the Act was not satisfied, there having been no consumption of cashew-shells in the manufacture of the ceramic goods. This Court held : "The cashew shells in the instant case, had been used as fuel in the kiln. The cashew shells did not get transformed into the end-product. These have not been used as raw-materials In the manufacture of the goods. These have been used only as an aid in the manufacture of the goods by the assessee. Consumption must be in the manufacture as raw-material or of other components which go into the making of the end-product to come within the mischief of the section. Cashew shells do not tend to the making of the end product. Goods used for ancillary purposes like fuel in the process of the manufacture, do not fall within section 5A(I)(a) of the Act. Cashew shells, therefore, do not attract levy of tax under the said section ........" (at p. 634 of JT) : (at p. 999 of AIR) (Emphasis Supplied) Sri Ganguly says that "Sodium Sulphate" in the present case must, like the cashewshells, be held to have been used as an aid in the manufacture of paper and for ancillary purposes like fuel and not as "Raw-Material" in the manufacture of paper.;