ORDER
G. Sankaran, Member (T)
1. The captioned appeal was initially filed as a revision application before the Central Government which, under the provisions of Section 35-P of the Central Excises and Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The appellants manufacture synthetic detergents marketed under the brand name ‘Surf’ and soap. For the purpose of packing these products, they used to bring from outside their factory printed cartons on which duty leviable under Item No. 68 of the Central Excise Tariff Schedule (GET) had been paid. The appellants contended before the Assistant Collector that the finished products, namely, synthetic detergent and soap were eligible for partial exemption from the excise duty leviable thereon to the extent of the duty paid on the printed cartons used in their packing. This claim was made in terms of Central Excise Notification No. 201/79 dated 4-6-1979. The appellants also put forth an alternative contention that, in the event of the aforesaid contention not being accepted, it should be held that the cost of the printed cartons and packing of the finished products into the cartons were in the nature of post-manufacturing expenses and, therefore, were deductible from the assessable value of the finished product. Both these contentions were rejected by the Assistant Collector as well as the Appellate Collector. In short, it was held by the Appellate Collector that packing of manufactured goods for their safety and protection or transportation was not a process incidental or ancillary to the completion of the manufactured goods. Neither in Section 2(f) of the Central Excises and Salt Act, nor in the relevant tariff entries, packaging was included as a process of manufacture in the case of these goods. It could not be said that the printed cartons were used in the manufacture of the finished products. As regards the alternative contention. it was held that in accordance with Section 4(4) (d) of the Central Excises and Salt Act, only the cost of packing of > a durable nature, returnable by the buyer to the assessee, was eligible for deduction and printed cartons not being durable or returnable, their cost was not, deductible from the assessable value. . It is against the Appellate Collectpr’s order dated 20-6-1981 that the appellants are presently before us.
3. Shri M.S. Gupta, Senior Legal Manager of the appellant company, urged before us in the course of the hearing that Central Excise Notification No. 201/79 did not define “inputs”. The term was used only to designate or refer to any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act which had been used in the manufacture of other excisable goods on which duty of excise was leviable. The term “inputs” was not used here in the sense of ingredient. That this was so, was abundantly clear from the fact that this notification was amended by Notification No. 105/82, dated 28-2-1982 which substituted the phrase-
“and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as ‘the inputs’)”, by the phrase-
“and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, have been used as raw materials or component parts (hereinafter referred to as ‘the inputs’)”.
4. Shri Gupta thereafter proceeded to cite certain judicial pronouncements in support of his contention. He relied upon the Supreme Court decision in Union of India and Ors. v. Bombay Tyre International Ltd. etc. 1983 E.L.T. 1896 (S.C.), and submitted that primary packing was held to be a part of the manufacturing process though the packing itself might not be an ingredient of the manufactured goods. Then he referred to the Rajasthan High Court decision in Ramnagar Cane and Sugar Co. Ltd, Jaipur and Ors. v. Union of India and Ors.- 1983 E.L.T. 6 (Raj) in which the Court held that packing of vegetable products falling under Item No. 13 was a process incidental and ancillary to the completion of the manufacture of vegetable product. Reliance was also placed on the Tribunal’s decision in the Collector of Central Excise, Nagpur v. Ballarpur Industries Ltd.- 1983 E.L.T. 1263 in which the Bombay Bench of this Tribunal held that sodium sulphate used in the manufacture of sulphate pulp from which paper was produced, could be said to fall within the scope of Notification No. 201/79 dated 4-6-1979. Shri Gupta also referred to the meaning of the word “inputs” in standard Dictionaries and said that even containers were deemed as “inputs”. While the appellants would not plead that printed cartons constituted raw materials for the purpose of the notification as amended on 28-2-1982 by Notification 105/82, they would say that in accordance with the dictionary meaning it could be said that printed cartons, constituting essential packing, were “components”. Concluding, Shri Gupta urged that if two views were possible on the interpretation of the Notification 201/79, the one favourable to the assessee must be adopted.
5. Opposing the appeal, Smt. Vijay Zutshi submitted that the term “inputs” implied that they should go into the manufacture of the goods as ingredients or components. Dictionary meanings were not relevant or useful, nor was the concept of valuation in Section 4 decisive of the correct interpretation of the notification. Synthetic detergents (Surf) were also available in the market in paper packets. It could not be said that printed cartons were essential packing. Referring to the decision of the Bombay Bench in 1983 E.L.T. 1263, she submitted that in’ that case sodium sulphate was used up or consumed in the manufacture of sulphate pulp which was in turn used in the manufacture of paper. In the present case, printed cartons were not used up in the manufacture of Synthetic detergents. The ratio of the said decision was, therefore, not applicable. Referring to the Rajasthan High Court decision in 1983 E.L.T. 6, she submitted that the Court was concerned in that case with the question of valuation of the goods for assessment to duty and, therefore, the said decision had no bearing on the present case. She further contended that the amending Notification No. 195/82 did not bring about any change in the concept of “inputs”, but only clarified the concept which existed even previously. She concluded by saying that if two interpretations were possible, the one adopted by Revenue should not be upset merely on the ground that the other interpretation is more beneficial to the assessee.
6. We have considered the submissions before us. The relevant portion of Notificiation No. 201/79 dated 4-6-1979 is reproduced below:-
“Notification No. 201/79 dated 4-6-1979.
In exercise of the powers 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 Excises, dated the 18th June, 1977, the Central Government hereby exempts all excisable goods (herinafter referred as “the said goods”), on which the duty of exciss is leviable and in the manufacture of which any goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) (hereinafter referred as “the inputs”) have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs :
Provided that the procedure set out in the Appendix to this notification is followed :
Provided further that nothing contained in this notification shall apply to the said goods which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty.”
A careful reading of the notification would show that the term “inputs” has not been used in it in the ordinary sense of the term but as a term of reference to goods falling under Item No. 68 of the CET used in the manufacture of other excisable goods. The term “inputs” itself is one of wide scope and not, as the Department contends, of restricted or narrow scope. What the notification requires is that the Item 68 goods which are referred to as “inputs” are used in the manufacture of other excisable goods. The Department wants to interpret the notification to mean that the Item 68 goods should enter into the composition and form part or ingredients of the finished product. In other words, they should be used as raw materials or components. But then this requirement that Item 68 goods should be used as raw materials or component parts was written into the notification only on 28-2-1982 by the amending notification No. 105/82. The amending notification, in our view, narrows down the scope of the 1979 notification and, incidentally, also the scope of the expression “inputs” as contemplated in it. In other words, with this amendment, the finished excisable goods must inter alia be made from the Item 68 goods if they are to earn exemption under the notification. Prior to the amendment, this was not a requirement. The item 68 goods need have been used only in the manufacture of the finished excisable goods.
(emphasis supplied)
7. Much arguments have been addressed by both sides on the question whether packing amounts to a process of manufacture in the present case. Both sides have cited case law in support of their rival contentions. We had occasion, though in a somewhat different context, to go into the question at length in our Order No. C-340/84 dated 4-6-1984 in Appeal No. ED(SB) A. No. 2734/83-C in the case of Collector of Central Excise, Indore v. Orient Paper and Industries Ltd., Amlai. In that case, the Revenue had vehemently contended before us that wrapping paper used in packing reams/reels of paper and reel core on which paper is wound could not be said to have been used in the manufacture of paper or board which was wrapped or packed with the wrapping paper. That is to say, the proocess of packing or wrapping was not a process of manufacture. The appellants had equally vehemently contended that packing or wrapping was a process of manufacture. After considering and discussing the following decisions :-
(i) Calcutta High Court in Orissa Industries Ltd. v. Union of India and Ors.- 1979 E.L.T. J 457;
(ii) Karnataka High Court in Alembic Glass Industries Ltd. v. Union of India and Ors.- 1979 E.L.T. J 461:
(iii) Madras High Court in E.I.D. Parry Ltd. and Anr. v. Union of India- 1979 E.L.T. J 18;
(iv) Madras High Court in Seshasayee Paper and Boards Ltd., Erode v. Appellate Collector of Customs and Central Excise, Madras- 1984 (15) E.L.T. 3 (MaD);
(v) Madras Bench of this Tribunal in Collector of Central Excise, Hyderabadv. Bhadrachalam Paper Board Ltd.- 1983 E.L.T. 2090 ;
(vi) Supreme Court in Union of India and Ors. v. Bombay Tyre International Ltd. etc.-1983 E.L.T. 1896 (S.C.);
(vii) Special Bench ‘D’ of this Tribunal in Collector of Central Excise, Calcutta v. Kanoria Jute Mills, Calcutta-Appeal No. 1418/81-D Order No. I46/84-D, dated 8-3-1984),
we took the view that normal minimum packing (not any special packing or durable/returnable containers) without which a manufactured product could not be delivered whether for reasons of transport or otherwise, should be treated as a process incidental or ancillary to the completion of that product and that it would not be correct to say that such packing materials were not used in an incidental or ancillary process to complete the manufactured product by turning it into marketable goods just because the materials used for the normal minimum packing were not “used up”. This particular view was expounded at length in the Special Bench ‘D’ decision referred to above and following that decision we held that the benefit of the proforma credit under Central Excise Rule 56-A of the duty paid on the packing or wrapping paper used for packing or wrapping of other varieties of paper was admissible for being set off against the duty payable on the packed or wrapped paper. We agree with Shri M.S. Gupta that the amending notification was only prospective in nature. We do not agree with Smt. Vijay Zutshi that it was in the nature of a clarificatory notification which merely clarified the position already obtaining It is true that synthetic detergent is available in the market in paper packs also. That, however, would not detract from the considerations which have led us to the above conclusion in respect of printed cartons used in the manufacture of synthetic detergents marketed in such cartons.
8. Shri Gupta had also cited before us the Supreme Court’s decision in J.K. Cotton Spinning and Weaving Co. Ltd. v. Sales Tax Officer, Kanpur and Anr.-AIR 1965 (S.C.) 1310 and that of the Calcutta High Court in Phelps and Co. (Pvt.) Ltd. v. Member, Board of Revenue, West Bengal-20 STC (1957) 511 which followed the Supreme Court decision in the aforesaid case and in another case. In the case before the Supreme Court, their Lordships were concerned with the interpretation of Section 8 (3) (b) of the Central Sales Tax Act which dealt with goods purchased by a registered dealer as being intended for re-sale by him or subject to any Rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power. Rule 18 framed by the Central Government under Section 13 of the Act read at the material time as follows :-
“The goods referred to in Clause (b) of Sub-section (3) of Section. 8 which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power.”
It was while construing these two provisions read together, that the Supreme Court held, among other things, that there was no warrant for limiting the meaning of the expression “in the manufacture of goods” to the process of production of goods only but that it would take within its campass all processes which are directly related to the actual production, such as equipment used in the process of designing, electrical equipment such as humidifiers, exhaust fans and similar equipment. It can easily be seen from the two provisions that the expression “in the manufacture of goods” has, by law, been given a wide amplitude. There are no similar provisions in the Central Excise Law. Section 2 (f) of the Central Excise Act gives only an inclusive definition-“includes any process incidental or ancillary to the completion of a manufactured product”. In our view, the ratio of the decision cited has no application to the facts of the case before us.
9. While conceding that printed cartons do not constitute raw material used in the manufacture of the finished product, Shri M.S. Gupta had contended before us that the printed carton would come within the meaning of component part and for this purpose he relied upon dictionary meanings which define “component” as “serving as one of the parts of a whole”; “forming or functioning as a part or aspect; constituent” and part as “a portion or division of a whole”. These dictionary meanings do not help the appellants. It cannot be seriously claimed that printed cartons which are used for packing synthetic detergent are constituents or parts of the detergent. We do not accept Shri Gupta’s contention.
10. In the result, we hold that the appellants were entitled to the benefit of Notification No. 201/79 in respect of printed cartons on which duty under Item No. 68 CET had been paid. This position would hold good till the notification was amended by Notification No. 105/82 dated 28-2-1982. All relief flowing from this order shall be granted to the appellants within 3 months from the date of communication of this order.
11. In the view which we have taken, it is not necessary for us to go into the alternative submission of the appellants, namely, that if it is held that packing is not a process of manufacture, the cost of packing should be excluded from the assessable value. In any event, this point is no longer open to argument in the light of the Supreme Court decision in the Bombay Tyre International case.