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Andhra Pradesh High Court
Judges : K.RAMACHANDRA RAO, M.JAGANADHA RAO
A.P.Paper Mills Ltd. - Appellant
Versus
Union of India - Respondent
Decided On : 10-20-82
EXCISE DUTY - WRAPPING PAPER - LEVY OF DUTY - WRAPPING PAPER USED FOR PACKING OTHER VARIETIES OF PAPER - WHETHER LIABLE TO EXCISE DUTY TWICE OVER - CENTRAL EXCISES AND SALT ACT, 1944, SECTIONS 3, 4(4)(D), 17.
Fact of the Case:
The Andhra Pradesh Paper Mills Limited manufactured different varieties of paper, including mill wrapper, which was used for packing other varieties of paper and consumed within the factory. The Mills paid excise duty on the value of the wrapping paper at the tariff rate applicable thereto. However, the Assistant Collector of Central Excise demanded payment of duty on the wrapper paper used for packing other kinds of paper and also on the value of the wrapping paper as forming part of the reams or reels of other paper, contending that the wrapping paper was liable to duty under Tariff Item 17(2) before it was taken up for use within the factory of production as a wrapper and that no reduction of value of the wrapping paper would be permissible when the wrapper reams are cleared from the factory.
Finding of the Court:
The court held that the wrapping paper, once assessed to excise duty as wrapping paper prior to its user for packing or wrapping other varieties of paper, cannot once again be subjected to excise duty as forming part of the value of the package containing other dutiable paper. The court reasoned that levying excise duty on the value of the wrapping paper prior to its being used for packing other varieties of paper, and also in its value as forming part of the other varieties of paper with which it was wrapped or packed, amounts to levying excise duty twice over on the same excisable goods, which is not contemplated by the provisions of sections 3 and 4 read with the Tariff Item 17.
Issues: Whether the wrapping paper used for packing other varieties of paper is liable to excise duty twice over.
Ratio Decidendi: The court relied on the principle that excise duty is a tax on the manufacture or production of goods and can only be levied on manufacturing cost and manufacturing profit. The assessable value cannot be loaded with any other cost or profit which is unrelated to manufacture. In the instant case, the wrapping paper had already been assessed to excise duty as wrapping paper prior to its user for packing or wrapping other varieties of paper. Therefore, its value cannot once again be subjected to excise duty as forming part of the value of the package containing other dutiable paper.
Final Decision: The court allowed the writ petition and issued a writ of mandamus directing the respondents 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 wrapper paper in accordance with the tariff rate applicable thereto.
( 1 ) THE Andhra Pradesh Paper Mills Limited, Rajahmundry, (hereinafter called "the Mills"), a public Limited Company, has filed this Writ Petition for the issue of a Writ of Mandamus directing the respondents, (1) the Assistant Collector of Central Excise, Integrated Divisional Office, Rajahmundry; (2) Collector of Central Excise, Guntur; (3) Union of India, to allow the Mills to clear the different varieties of paper manufactured by them without insisting on payment of duty on the wrapping paper used internally for packing reams and reels of other varieties of paper manufactured by them.
( 2 ) THE facts leading to the filing of the Writ Petition are as follows : The Mills manufactured different varieties of paper in addition to "mill Wrapper" which is used for packing other varieties of paper and which is used and consumed in the factory itself without being sold to outsiders.
( 3 ) UNDER Section 3 of the Central Excises and Salt Act, 1944 (hereinafter called "the ACT") excise duty shall be levied and collected in such a manner as may be prescribed on all excisable goods at the rates set forth in First Schedule to the Act. Under sub-section (2) thereof, Central Excise may by notification in the Official Gazette fix for the purpose of levying the said duties, tariff values on the articles mentioned in the First Schedule as chargeable with ad valorem duty. Different tariff values may be fixed for different classes or descriptions of the same article as provided by sub-section (3 ). Section (4) of the Act provides for the valuation of the excisable goods for the purpose of charging of duties of excise on the excisable goods. Sub-section (4) (d) of Section 4 lays down the method of valuation in relation to excisable goods and it reads as follows :"4 (4) (D ). Value in relation to any excisable goods.- (i) Where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. EXPLANATION :- In this sub-clause packing means the wrapper, container, bobbin, pirn, spool, reel or wrap beam or any other thing in which or on which the excisable goods are wrapped, contained or wound. (ii) Does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale".
( 4 ) ITEM 17 of the First Schedule which prescribes the rates of duty in respect of different varieties of paper, reads as follows :-@@ ------------------------------------------------------------------------ Item No. Description of Goods Rate of duty 1 2 3 -----------------------------------------------------------------------@@ 17. Paper and paper board, all sorts (including pasteboard, mill board, strawboard, cardboard and corrugated board), in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power - (1) Uncoated and coated printing Twenty five per cent ad valorem. (2) Paper board and all other kinds of Forty per cent paper (including paper or paper boards, ad valorem. which have been subjected to varieties, treatments, such as coating, impregnating, corrugation, creping and design printing), not elsewhere specified.------------------------------------------------------------------------@@
( 5 ) RULE 9 (1) of the Rules, which lays down the time and manner of payment of duty, provides that the excisable goods shall not be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto which may be specified by the Collector in that behalf, whether for consumption, export or manufacture of any other commodity in or outside such
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