KUSUM PRODUCTS LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appeal by M/s. Kusum Products Limited, Calcutta is directed against the order-in-appeal passed by Collector of Central Excise (Appeals), Calcutta upholding the order of Assistant Collector of Central Excise, Rishra Division, whereby the latter had rejected the application of the Company for availing Modvat benefit in respect of duty paid on polythene granules received by them and got converted into polythene bags (polypacks) by outside job workers for return and use by them for packing their product, Organic Surface Active Agent (detergent).

(2.) The appeal attacks the order of the Collector (Appeals), inter alia, on the following grounds -

(3.) THE Assistant Collector has rejected the claim referring to Rule 57D(2) which is not at all applicable in their case. In fact, he had admitted that the polypacks are intermediate goods, but he rejected their request for Modvat Credit facility on the ground that the said intermediate products were exempt from duty under Notification No. 132/86 dated 1-3-1986. THE learned Consultant also pointed out that there was discrimination against them as while their request was turned down, other manufacturers in the Collectorate have been granted the same facility. He referred to the copy of the Challan submitted by them along with the appeal to substantiate his contention on such discrimination. He cited the judgment of the Gujrat High Court in Suhrid Geigy Ltd. v. Union of India [reported in 1980 (6) ELT 538 (Guj.)] in this regard wherein the discrimination involved in non-uniform collection of duty from two manufacturers in identical situations has been adversely commented upon by the Court. In answer to a question from the Bench as to how the polythene granules used in the manufacture of polypacks (packaging material) can be considered to be used in the manufacture of their finished product, detergent powder. Shri Chakraborty, the learned Consultant for the appellants cited the decision of the Tribunal in Hindustan Lever v. Collector of Central Excise, Bombay (reported in 1984-ECR-2006-CEGAT) wherein processed vegetable oil was held to be eligible for the exemption granted to it if used for the manufacture of soap, notwithstanding the fact that the oil was first converted to vegetable tallow which was exempt from duty. He handed over a photostat extract of the above-said decision. He also referred to a clarification issued by the Government in respect of processed vegetable non-essential oil used for manufacture of paints though an intermediate product, Alkyd Resin, which is exempt from duty is first obtained. This clarification contained in their letter No. 56/24/70-CX-3 dated 12-7-1971 was referred to by Allahabad High Court in their judgment in Nagrat Paints v. Union of India [reported in 1978 (2) ELT J-39 (All.) ]. It was observed by the High Court that the credit in respect of Vegetable Non-Essential Oil cannot be denied to the manufacturers merely because it was converted at an intermediate stage into alkyd resin. THE learned Consultant also submitted a copy of the Kar-nataka High Court judgment in the case of N. G.E.F. Ltd. v. Collector of Central Excise, Bangalore. It was held by the High Court that notwithstanding the emergence of an exempted intermediate product viz. die-cast-rotors, the starting material electrical stampings was held to be used in the manufacture of the final product, electric motors to satisfy the condition of the relevant exemption notification.