ORDER
K.L. Rekhi, Member (T)
1. The controversy in this appeal, as argued and pressed for before us, is as follows.
2. The appellants manufactured packing and wrapping paper as well as other paper. They paid the central excise duty on wrapping paper as dud under Item 17 of the Central Excise Tariff. They utilised the duty paid wrapping paper for making reel cores within their factory. The reel cores are in cylinderical or tubular shapes and are used for wrapping other paper thereon for marketing. The reel core fell under the residuary Item No. 68 of the Central Excise Tariff. But no central excise duty on reel cores was charged from the appellants because Item 68 goods, if captively used in the same or another factory of the same manufacturer, were exempt from payment of duty. The appellants used the reel cores for wrapping other paper thereon. As per the practice of the paper trade, the appellants charged their customers the price of the total weight of the goods delivered which included the weight of the wrapped paper as well as the weight of the reel core. But to the Central Excise Department, they paid duty only on the net weight of the wrapped paper, that is, after excluding the weight of the reel core. In this way, the value of the reel core did not get added to the value of the goods delivered for the purpose of assessment of the central excise duty. The lower authorities have held that the value of reel cores was to be included in the assessable value of paper and on that basis have confirmed the six demands for the differential central excise duty, amounting in all to Rs. 1,09,236.65 for the period from 16-3-1976 to 31-8-1976. The appellants are in appeal against these orders.
3. Before us, the appellants concede that reel cores were a packing material for the other paper which was wrapped thereon. They further concede that reel cores constituted the primary and essential packing for the wrapped paper. They also concede that as per the provisions of Section 4(4)(d)(i) of the Central Excises and Salt Act, 1944, cost of packing (which is not durable and returnable) has to be added to the assessable value of the goods. Their only objection is on the ground of double taxation since the wrapping paper, out of which the reel cores were made, had already suffered the central excise duty under Tariff Item No. 17. Tne wrapped paper was also assessable under Tariff Item No. 17 only. Inclusion of the value of the reel cores, which in turn, would take in the value of the wrapping paper plus the duty already paid on such wrapping paper, in the assessable value of the wrapped paper would mean charging duty on the wrapping paper value under Tariff Item No. 17 a second time. They relied on the Madras High Court judgment reported at 1987 (32) ELT 503 – Seshasayee Paper and Board Limited in which it had been held that double taxation on “wrapper paper was not permissible and hence the cost of the wrapper paper, which had already suffered duty in the hands of the same manufacturer, need not be included in the assessable value of the other paper wrapped on it. The appellants also relied on the Constitution Bench judgment at AIR 1976 (S.C.) 599 – U.O.I. v. Tata Iron and. Steel Company Ltd. – for the proposition that there could be no double taxation on the same article.
4. On a query from the Bench, the appellants accepted that the facts in the Seshasayee’s case were somewhat different inasmuch as in that case the duty paid wrapper paper was Used as such for wrapping other paper therein while in the appellants’ case the wrapper paper was first made into reel cores and such reel cores were then used for wrapping the other paper thereon.
5. The learned representative of the department pleaded that the Seshasayee case decided by the Madras High Court being distinguishable on facts, the ratio of that judgment was not binding for the present appeal. He relied on the Supreme Court judgment in the case of Empire Industries Limited – [1985 (20) ELT 179 (S.C.) – paragraph 47] to say that the assessable value of an article included the full intrinsic value of that article. He further relied on the Supreme Court judgment in the case of Godfrey Phillips (India) Limited – [1985 (22) ELT 306 (S.C.) – Paragraphs 17 and 18] according to which the cost of essential and primary packing formed a part of the value of the article. He argued that once it was accepted that the cost of packing was includible in the value of the article, no distinction was justified on the ground whether the packing had been manufactured in the same factory or had been purchased from outside; otherwise, it would lead to inequitable taxation. He also relied on the Bombay High Court judgment in the case of Ashok Traders – [1987 (32) ELT 262 (Bom.)] in which it had been held that addition of the basic customs duty to the CIF value of the imported goods, for the purpose of levy of additional customs duty (commonly known as countervailing duty), did not amount to double taxation; it was only a different mode provided for by the Legislature for assessing the additional customs duty.
6. We have given the matter, our most earnest consideration. There could be no quarrel with the principle laid down by the Hon’ble Supreme Court in the TISCO case aforesaid that double taxation on the same article was not permissible. But we find from the facts of this case that there was no attempt at taxing the same article twice. No doubt, the appellants first paid duty on the wrapping paper, but when such wrapping paper was consumed in the making of reel cores, the identity of the wrapping paper was lost. The resultant product that came into existence was a reel core which was a different article in all respects. It was classifiable also under Tariff Item No. 68 and not under Item 17 in which wrapping paper and other paper fell. No central excise duty was, however, charged in respect of the reel cores since they vere exempt from duty if captively used. Therefore, when the lower authorities sought to include the cost of the reel core in the value of the wrapped paper, that is, the final product, there was no double taxation on the same article. One could say that there was multi-point taxation of the final product in the sense that some of its constituents had already paid the central excise duty at same stage or the other. But this was quite common in the Central Excise Tax Structure prevalent at the material time and the law and the Tariff specifically provided for it, relief being given only on a selective basis by way of proforma credit or set off for the duty paid on the inputs. In the case of the appellants, the final product was the paper wrapped on the reel core. The appellants charged the full price of the paper as well as the reel core from their customers. According to the Supreme Court judgment in the Empire Industries case aforesaid, the full intrinsic value of the paper, inclusive of the cost of the essential reel core, was chargeable to duty. We agree with the learned representative of the department that the facts in the Seshasayee’s case aforesaid being different, the ratio of that case was not binding for deciding the appeal before us.
7. In the circumstances, we uphold the lower orders and dismiss this appeal.