Wrapper paper used for packing reams/reels is not subject to excise duty once over again because it is used for the convenient distribution of the finished product.

The facts leading to the writ petition are as under : The petitioner company is engaged in the manufacture of paper/boards. As per the international trade practice, in the paper industry and as per the Indian Standards Specifications, the ream/reel weight of paper and paper-board sold is inclusive of the weight of the wrapping paper. In other words, the weight of ream/reel is the combined weight of the packed paper as well as the wrapping paper. This convention has been accepted by the Directorate General of Supplies and Disposals, Government of India, for supplies under Rate Contract also and the chargeable weight of the paper is always inclusive of the weight of the wrapping paper.

2.Till May, 1972, the excise duty on wrapping paper and the paper packed in such wrapping paper was being collected at the rate applicable to the packed paper. The paper mills were also realising the duty on wrapper and packed paper on the this basis from their customers. However, with effect from 1-6-1972, the petitioner was called upon to pay duty on wrapping paper and wrapped paper separately at the rates of duty applicable to the them.

3.The petitioner was paying all along excise duty on container and contents at the time of removal only under Rule 49 of the Rules framed under the Central Excises and Salt Act, 1944, hereinafter referred to as the Act. When thead valoremrate of duties were introduced for paper and paper-board, the petitioner was called upon by the Excise Department to pay duty on wrapper paper manufactured and taken to the finishing house for use within the factory for packing other varieties of paper and paper-boards. The Department took the stand that the removal for packing makes it liable for duty under Item 17(2) of the Central Excise Tariff, before it was taken up for use within the factory as wrapper paper. On the packed paper excise duty was again paid including the wrapper, at the time of final removal from the factory.

4.This practice was in vogue with effect from 8-9-1977, paying 'under protest' duty on wrapper at the time when it was taken by the Finishing House for packing reams/reels and again at the time the reams/reels were cleared from the bonded godown, on the total weight of the reams/reels, which included the weight of the wrapper paper on which duty had already been paid. The result of it was excise duty was paid on wrapper paper twice : (1) at the time it was taken by the Finishing House for use within the factory and (2) at the time of final clearance of the packed reams/reels for being supplied to the customers.

5.Under Rule 56A of the Central Excise Rules, 1944, a manufacturer is entitled to claim a credit of duty already paid on material or component parts of finished products as the case may be on such goods received by him for purposes of manufacture of the finished products, on the terms and conditions as laid down therein.

6.By the notification dated 3-11-1967 as amended by notification No. 109/82-C.E., dated 28-2-1982 paper and paper-board is listed under Serial No. 8 in the list of commodities notified by the Central Government for the purpose of sub-rule (1) of Rule 56A.

7.On 21-9-1977 the petitioner applied to the Assistant Collector of Central Excise, Salem, claiming set off of duty paid or allowing of proforma credit for duty paid on the wrapper paper while making payment of duty at the time of final clearance of the packed reams/reels from their godown for being supplied to the customers. This was under the said Rule 56A. The second respondent by his order dated 31-10-1977 rejected the claim for set off. Thereupon, an appeal was preferred to the first respondent, the Appellate Collector of Customs and Central Excise, on 29-12-1977. By an order dated 16-5-1979 the appeal was rejected on the grounds stated therein. It is under these circumstances, that the present writ petition has come to be filed for certioriried mandamus to quash these orders and a consequent direction to the responde