ORDER
G. Sankaran, Senior Vice-President
1. The common issue decided by the Collector (Appeals) in both these matters is that the respondents were eligible for the benefit of proforma credit of the duty paid on wrapping or packing paper used to pack other varieties of paper, towards payment of duty on the latter. The Collector found in favour of the respondents. The Executive Collector, namely, Collector of Central Excise, Meerut has questioned the finding of the Collector (Appeals) in both these matters.
2. We have heard Shri M.S. Arora, DR, for the appellant – Collector and Shri J.S. Kapil, Advocate, for the respondents.
3. In the appeal memorandum, a ground has been taken that proforma credit of the type referred to earlier is not permissible since wrapping or packing papers cannot be considered as a material or component part used in the manufacture of other varieties of paper. This issue has been considered by the Tribunal in Collector of Central Excise, Indore v. Orient Paper and Industries Ltd. – 1984 (18) ELT 88. It was held that just because the material used for the minimum packing are not “used up” in the process, it would not be correct to say that it has not been used in an incidental or ancillary process to complete the manufactured product, by turning it into marketable goods. Therefore, the benefit of proforma credit under Rule 56A, of the duty paid on the packing or wrapping paper used for packing, is admissible for being set off against the duty payable on the packed or wrapped paper. This particular issue was not argued before us by the learned D.R. In the light of the Tribunal’s decision (supra), we hold that the Collector (Appeals)’s decision was correct.
4. But the real challenge to the impugned order is that the Collector should not have adjudicated upon the admissibility of the benefit of Rule 56A because this point had not been raised by the respondents before the Assistant Collector. In support of this proposition, the Departmental Representative has relied on the Bombay High Court judgment in Ugar Sugar Works Ltd. v. Commissioner of Income-tax, Poona -1983 (141) ITR 326 and the Andhra Pradesh High Court judgment in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill and Ors. -1977 (39) STC 57. In rebutting this contention, the Learned Counsel for the respondents had relied on the Tribunal’s decision in the Orient Papers and Industries Ltd. (supra) wherein it has been held that the Appellate Collector had authority to entertain the additional ground for good and sound reason. The Counsel has also drawn our attention to the record of personal hearing before the Assistant Collector on 24-5-1977. The relevant portion of the record reads as follows :-
“The value of the wrapper is included in the value of the packed paper but the assessee is paying duty on the wrapping paper at the time of its issue for purposes of packing within the factory. Thus instead of any profit, the assessee is paying double duty on the wrapper and as such the percentage of duty paid at one stage should further be deducted from the assessable value proposed to be fixed as submitted above, efforts will be made to work out the cost of the wrapping paper and instead of adding the margin of profit to the value so worked the duty initially paid at the time of clearing of the wrapping paper for purposes of packing should be deducted from the assessable value that may be fixed.”
The portion reproduced above does not suggest that the question of Rule 56A was even remotely raised before the Assistant Collector.
5. The real question is, therefore, whether the Collector (Appeals) could have allowed this ground to be raised/urged before him and proceeded to adjudicate on it.
6. The appellant-Collector has cited the Gujarat High Court’s judgment in Cibatul Ltd. v. Union of India and Ors. – 1979 (4) ELT 407 in support of his contention. In that case, the departmental authorities had set out certain grounds for holding that the manufacturer and the buyer were “related persons”. Those grounds were sought to be reinforced by certain facts in the affidavit filed on behalf of the Department. It was in this context that the Court held that since the proceedings before the Central Excise authorities were quasi-judicial in character, the impugned orders of departmental authorities could be supported only on the materials stated therein and not on any other grounds. In the instant case, no new facts are required to be investigated. The quantity of the wrapping or packing paper used is a matter of record. Their use in the packing of other varieties of paper is not again a matter of dispute. The duty-paid character of the wrapping or packing paper is also a matter of record. As such, it does not appear that any new facts are required to be investigated with reference to the claim of the respondents under Rule 56A. It is relevant to note that the decision relied upon for the Revenue is on the subject of seeking to support a quasi-judicial order on grounds not stated therein – not on the subject of seeking to support an appeal on grounds not taken up before the original authority but not requiring any fresh fact-finding. As such, we do not see how the said judgment could have come in the way of the Collector (Appeals) entertaining the additional ground and adjudicating thereon.
7. Another decision relied upon for the Revenue is the Bombay High Court’s judgment in Bush India Ltd. v. Union of India – 1980 (6) ELT 258. The principle laid down is the same as in the Cibatul’s case, namely, it is not open to an authority to urge in its affidavit in reply a ground not taken in the order sought to be impugned and thereby seek to make out a new case in justification of the impugned order.
8. The appellant-Collector has also relied on the Supreme Court’s observations in its judgment in the case of Mohinder Singh Gill and Anr. v. The Chief Election Commissioner and Ors. – AIR 1978 SC 851. The Bombay High Court in the Cibatul’s case referred to the Supreme Court’s observations but was disinclined to extend the principle in the Mohinder Singh Gill case to the order made under the Central Excise Act. Be that as it may, what the Supreme Court has observed in that case, was :-
“When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out.”
The Court further put the matter pithily: – “Orders are not like old wine becoming better as they grow older.” For the reasons we have stated earlier, we do not think that these observations help advance the Revenue’s case.
9. Two other decisions have been cited by the Revenue. One is of the Bombay High Court in Ugar Sugar Works Ltd. v. Commissioner of Income-tax, Poona – (1983) 141 ITR 326. The Court held therein that the finding of the Income Tax Officer not having been appealed against in appeal to the Appellate Assistant Commissioner, it must be assumed that the assessee was not aggrieved by the finding of the Income Tax Officer and had accepted the same. Further, the finding of the Income Tax Officer not being the subject matter of appeal before the Appellate Asst. Commissioner and he not being called upon to adjudicate on the same and not having adjudicated upon the correctness or otherwise of the same, there could not be any decision of the Appellate Asst. Commissioner on the finding of the Income Tax Officer, and, therefore, it could not be said that the assessee was aggrieved by the decision of the Appellate Asst. Commissioner in respect of the said matter so as to entitle him to file an appeal to the Tribunal under Section 253 of the Income-tax Act, 1961, against the order of the Appellate Asst. Commissioner on the said finding. The second decision is that of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill and Ors. – (1977) 39 STC 57. In this case, the Court held that the Tribunal had no jurisdiction to interfere with that part of the assessment order which was not the subject matter of an appeal by the assessee before the Assistant Commissioner. If the assessee has not disputed the correctness of any part of the assessment before the Assistant Commissioner in appeal, the order of the assessing authority to that extent becomes final and the assessee is precluded from agitating the correctness of that part of the order in the appeal before the Tribunal.
We do not think that these two decisions help the Revenue’s case.
10. In the instant case, the assessee was aggrieved right from the beginning about the levy of duty on the weight of the wrapping or packing paper – firstly, at the time when such paper was cleared within the factory for the purpose of packing other varieties of paper and secondly, when the Department sought to recover duty on the value of such paper along with the duty leviable on the value of the packing paper. Though the specific Rule 56A may not have been cited before the Assistant Collector, the rule was cited before the Collector (Appeals) in support of the claim that duty should not have been recovered twice on the packing or wrapping paper. Rule 56A, in a manner of speaking, also serves to mitigate the effect of multi-stage excise levy. In the context of this position, coupled with the position that no new facts are required to be investigated, we do not think that these two decisions have application to the instant case.
11. In the light of the above discussion, we cannot fault the impugned order. In the result, we uphold the order and dismiss these appeals.