ORDER
1. The present appeal dated 8-12-1979 as supplemented by a further communication dated 20-2-80 (originally filed as a revision application before Government and transferred to this Tribunal under Section 35-P of the Central Excise and Salt Act, 1944) has been filed by M/s. Shree Rayalaseema Paper Mills Ltd., Kurnool, who are engaged in the manufacture of varieties of paper including wrapping paper. The facts of the case are not in dispute but for a proper appreciation of the legal issues which flow from such facts, the same are briefly set out as hereunder :
2. When the appellants started production in their paper mill in April, 1979, the Assistant Collector of Central Excise, Kurnool vide his order dated 21-4-79 informed them that excise duty should be paid by them-(a) on wrapping paper produced by them prior to its use as wrapper for wrapping other varieties of paper, and (b) the value of such wrapping paper (including the duty element) should be added to the value of any other type of paper before the assessable value of such paper is determined. In other words, the Assistant Collector wanted the appellants to pay the central excise duty on the wrapping paper at two stages, viz., (1) when it was manufactured as wrapping paper and became dutiable under the appropriate item of the central excise Tariff and (2) when it was used as a wrapper for other varieties of paper which were cleared from the appellants’ factory.
3. Aggrieved by this order of the Assistant Collector the appellants preferred an appeal before the Appellate Collector of Central Excise, who, vide his order dated 17-9-1979 confirmed the order of the Assistant Collector and rejected their appeal. It is against the Appellate Collector’s order that the appellants are before us. It is also pertinent to add at this stage that while the proceedings before the Government were pending, the appellants moved the Andhra Pradesh High Court who passed a stay order vide writ petition No. 3097/80, dated 12-6-1980 and directed as follows;-
“The Government of India is directed to dispose of the revision preferred by the petitioner within two months from today. Meanwhile, the stay is made absolute on condition that the petitioner furnished bank guarantee towards excise duty on the Mill Wrapper paper produced by him at the time when the wrapper paper is removed from the godown to another godown for wrapping purposes to the satisfaction of the Assistant Collector of Central Excise, Kurnool. The writ petition is disposed of accordingly. No costs.”
4. Shri L.M. Kaul who appeared for the appellants stated that :-
(i) the goods, namely, the wrapping paper were not cleared from the factory and, therefore, could not be subjected to duty till they were cleared along with the other types of paper for which the said wrapping paper had been used ;
(ii) the Assistant Collector of Central Excise at Rajahmundry had been following a procedure under which the value of the wrapping paper produced in the factory and the value of the writing paper/printing paper etc. are separately declared for the purpose of duty and charg-ed to Central Excise duty at the appropriate rates when the said writing/printing paper is cleared from the factory ;
(iii) subjecting the wrapping paper to duty after its manufacture in the factory and again including the value thereof along with the duty paid at the time of final clearance of writing paper amounts to payment of excise duty twice on the same goods.
Shri Kaul referred to the recent judgment of the Andhra Pradesh High Court (Writ Petition No. 2055 of 1980-1983 ELT 86) whereby a similar issue was raised and disposed of by the Court. Shri Kaul stated that the Hon’ble High Court had ruled that the duty should be charged on wrapping paper only once and not twice i.e., once on its manufacture and for the second time when it was cleared along with writing or some other variety of paper for which it had been used for packing purposes.
5. Shri Mahesh Kumar appearing for the respondents referred to the explanation which has been added to Rules 9 and 49 of the Central Excise Rules, 1944, and given retrospective effect by the Finance Act, of 1982. He argued that since the wrapping paper manufactured by the appellants was being consumed or utilised in the factory, it is for the purposes of wrapping other varieties of paper and hence such paper should be deemed to have been removed from the factory immediately before the process of such consumption or utilisation commenced. Again, according to Shri Mahesh Kumar excise duty was leviable on such wrapping paper when it was cleared as packing material along with other varieties of writing paper. This was strictly in accordance with the law. He did not subscribe to the argument putforth by Shri Kaul that this amounted to paying the Central excise duty twice over. According to him when the duty was paid for the first time, it was on wrapping paper. When the duty was charged on writing paper or other varieties of paper packed in such wrapping paper, the collection of duty was not on wrapping paper per se but on that particular variety of paper which was removed from the factory. In this context, Shri Mahesh Kumar relied on the decisions in Ahmedabad Mfg. & Calico Printing Ltd., and Ors. v. Union of India-1982 E.L.T. 821 (Guj.) and in Geep Industrial Syndicate Limited v. Union of India and Anr. – 1982 E.L.T. 857 (All.). According to him, following the ratio of these decisions there is nothing illegal on levying the duty on the wrapping paper before its utilization as wrapping paper for other varieties of paper and later on its cum-duty value being added to the value of the writing paper or some other variety of paper when the same were cleared from the factory, since at this stage the wrapping paper has lost its identity as such and has merged with the finished product namely writing paper etc. taken out of the factory gate for clearance. Shri Mahesh Kumar further argued that such wrapping paper could not be considered as durable and returnable packing material within the meaning of Clause (d)(i) of Sub-section (4) of Section 4 of the Central Excises and Salt Act, 1944.
6. We have gone through the Court decisions cited by Shri Mahesh Kumar in support of his arguments. In the case of Mjs. Ahmedabad Mfg. and Calico Printing Ltd. and Ors., it had been held by the High Court that an excisable article could not be considered to be fully manufactured unless it was duly packed because packing is an integral and inseparable part of the process of manufacture of an excisable article. In such a situation, the cost element of packing is as relevant in determining the assessable value of an article as, say, the cost of raw-materials. In the case of M/s. Geep Industrial Syndicate Ltd., the Allahabad High Court had held that all expenses which a manufacturer incurs for putting an article in a marketable condition for sale at the factory gate to wholesale purchasers are to be included in the manufacturing cost.
In the instant case, however, it cannot strictly speaking, be said that the writing paper cannot be considered as not marketable unless it has been packed in wrapping paper. We also note that the wrapping paper and other varieties of paper are being manufactured in the same premises and basically the same machinery is used for manufacturing of such different varieties of paper. The finishing room is also the same i.e., the writing paper and the packing paper are put along side and the process of packing the former is completed there. It is difficult to go all the way with Shri Mahesh Kumar to accept his contention that the wrapping paper loses its identity completely when other varieties of paper are cleared from the factory packed in it. Shri Kaul has shown to us the gate passes wherein the weight of the packed paper and the wrapping paper is separately shown. He has also shown to us the approved price lists separately for the two varieties of paper. In view of the fact that values of wrapping paper and other varieties of paper are separately shown for assessment and so are the different rates of duty applicable thereto, it is possible to collect the duty on the two entities separately even though one may be used for packing the other.
Shri Kaul has drawn our pointed attention to the Andhra Pradesh Division Bench decision in the Writ Petition No. 2055 of 1980, decided on 3-11-1982, 1983 E.L.T. 86, wherein the Lordships of the High Court had to deal with identical issue. We observe that after a detailed and careful consideration of the matter in all its facets the Hon’ble High Court held that once the wrapping paper had been assessed to excise duty as wrapping paper prior to its use for packing or wrapping of other varieties of paper, the duty on it could not be charged a second time by adding its value to other varieties of paper and subjecting the total value of the two to central excise duty. Their Lordships directed the excise authorities to “allow the Mills to clear the excisable goods manufactured by them without insisting on payment of duty on wrapping paper used internally for packing reams and reels provided the Mills has paid excise duty on the value of the wrapping paper in accordance with the tariff rate applicable thereto.” As observed earlier, the facts of the present case are on all fours with the facts of the case of Andhra Pradesh Paper. Mills Ltd. .Since the appellants’ factory and the Andhra Pradesh Paper Mills Ltd. fall within the jurisdiction of the same High Court, it is appropriate that the procedure being followed by the Andhra Pradesh Paper Mills Ltd., in pursuance of the decision of the Andhra Pradesh High Court in the Writ Petition No. 2055 of 1980 should also be allowed to be followed by the appellants. We, therefore, direct that the wrapping paper in question be charged to excise duty only once in accordance with the ruling given by the Hon’ble High Court of Andhra Pradesh in their judgment referred to above.
The appeal is accordingly allowed.