CC AND CE Vs. GRASIM INDUSTRIES LTD.

JUDGEMENT

(1.) IN these three appeals, filed by the Revenue, the common issue involved is whether Modvat Credit of the duty paid on HDPE bags is available to M/s. Grasim Industries Ltd.

(2.) SHRI O.P. Arora, learned SDR, submitted that M/s. Grasim Industries manufacture various chemicals including Caustic Soda Lye; that they procured salt, which is not chargeable to Central Excise duty, from various salt manufacturers; that they send HDPE bags to the salt manufacturers for packing the salt in the bags for the purpose of transporting through railway; that the Adjudicating Authority disallowed the Modvat Credit of the duty paid on HDPE bags on the ground that these are not used in or in relation to the manufacture of the final products and that these bags are used for transporting raw -material from the manufacturer's premises to the premises of the respondents; that, however, the Commissioner (Appeals), under the impugned Order, has allowed the Modvat Credit on the ground that the bags are used in relation to manufacture; that the Commissioner (Appeals) has also given his finding that as per the provisions of Rule 57B of the Central Excise Rules, Modvat Credit on packing material is available subject to the condition that the cost of packing material is included in the value of the final product and that the respondents have included the cost of these bags in the value of Caustic Soda Lye. The learned SDR, further, submitted that HDPE bags are not used in relation to the manufacture of final product as these are used by the supplier of the salt for the packing of salt which is a raw -material; that the provisions of Rule 57B of the Central Excise Rules, 1944 are also not applicable as the packing material is not used in relation to the manufacture of the final product.

(3.) WE have considered the submissions of both the sides. Rule 57A of the Central Excise Rules, 1944 enables the manufacturer to avail of the Modvat Credit of the duty paid on inputs which are used in or in relation to the manufacture of the final product. The facts, which are not disputed in the present matters, are that the respondents manufacture Caustic Soda Lye for which salt is the main raw -material. The respondents obtain the salt from various salt manufacturers and they are sending HDPE bags to the salt manufacturers for packing salt for the purpose of transporting the same through railways. It is, thus, apparent that the bags, in question, are used for packing salt, which is a raw -material, by the manufacturer of salt. It is also not in dispute that no duty is paid on the salt as it is exempted from payment of duty. The bags, thus, have been used in or in relation to the manufacture of salt which suffers no Central Excise duty. Therefore, it cannot be claimed by the respondents that HDPE bags, in question, are used in or in relation to the manufacture of their final product, namely, Caustic Soda Lye. There is no substance in the submissions that the salt is an intermediate product as it is not their case that the salt is being manufactured by them in their factory and is coming as an intermediate product in the process of manufacture of Caustic Soda Lye. They are undisputedly purchasing the salt from various manufacturers. Provisions of Rule 57F(4) are also not applicable as HDPE bags, sent by the respondents, are not further processed in the manufacture of final product. Rule 57B of the Central Excise Rules is also not applicable. Rule 57B, at the relevant time, empowered the manufacturer of final product to take credit of the duty paid on packing material provided the cost of such packing material is included in the value of the final product. In the present matters, the packing material is not used for packing the final product manufactured by the respondents as the same are used for packing the raw -material which is manufactured by some other manufacturer. The decision in the case of Ashwin Vanaspati Inds. (Pvt.) Ltd. (supra), relied upon by the learned Advocate, is not applicable as the facts are entirely different. In Ashwin Vanaspati Industries (Pvt.) Ltd. case (supra), the assessee were receiving tin sheets as packing material and in their own factory converting them into containers without the aid of power; that as the power was not used, the containers were exempt from payment of duty. The Tribunal extended the benefit of Modvat Credit holding that the words used in Rule 57A are 'packing materials: The learned Single Member, in their own case vide Order dated 26.2.2004 allowed the Modvat Credit on the ground that the cost of the packing material was included in the value of final product. We respectfully do not agree with the said decision as in the said decision it was not considered that the HDPE bags had not been used in or in relation to the manufacture of final product but were used in the manufacture of inputs in some other's factory. Accordingly, we hold that the Modvat Credit of duty paid on HDPE bags is not available to the respondents. However, we do not find the present matters fit for imposing any penalty on the respondents as the issue involved is one of interpretation of Rules. The appeals are disposed of in these terms.