P.K. Desai, Member (J)

1. The CEGAT, West Regional Bench, has, vide Order No. 730/92-WRB, dated 28-4-1992, referred this appeal to the Larger Bench, observing that there is a conflict in the views expressed by the South Regional Bench in Ponds (India) Ltd. v. Collector -MANU/CC/0063/1987 : 1988 (38) E.L.T. 351 (Tribunal) and Collector of Central Excise v. Indo Swing Ltd. - MANU/CC/0041/1991 : 1992 (57) E.L.T. 606 (Tribunal), on one hand, and the views expressed by the East Regional Bench in Rasoi Ltd. v. Collector, MANU/CK/0098/1990 : 1990 (49) E.L.T. 522 (Tribunal) and the West Regional Bench in F.D.C. Ltd. v. Collector - MANU/CM/0013/1991 : 1991 (55) E.L.T. 601 (Tribunal) and Parle Products (P) Ltd. v. Collector - MANU/CM/0051/1990 : 1992 (57) E.L.T. 152, on the other, on the major issue as to what is the "packaging material" as contemplated in Rule 57A of the Central Excise Rules, 1944, and whether the benefit of MODVAT facility is available, only if the packaging material is used as such, or whether the benefit is available, also if the packaging material received has to undergo some conversion as also whether, the item that comes into existence on conversion of the packing material, is exempt from duty, if construed as a final product, would attract the provisions of Rule 57C of the Rules, or could that be construed as an intermediate product attracting the provisions of Rule 57D(2) of the Rules.

2. The undisputed factual position here, is, that the appellants are the manufacturers of Vanaspati (vegetable ghee or hydrogenated oil - as is commonly known), and market the same in Tin containers. They receive tin sheets as packaging material and in their own factory, convert them into container without the aid of power. The mental containers so made are used only for the purpose of packing their product, namely vanaspati and none else. The containers are classified under Tariff Heading 8312.19, but because they are manufactured without the aid of power, they are exempted from payment of excise duty. As the tin sheets are specified as the input and Vanaspati as the final product for availment of MODVAT Credit, the appellants, after filing declaration as required under Rule 57G of the Rules, availed of MODVAT Credit for the duty paid on the tin sheets claiming the same as permissible vide Rule 57A of the Rules, and utilised that against payment of excise duty on the vanaspati, which is their final product. The availment of credit is objected to, on the ground that the tin sheets are not used as such, in packing the final product, but are utilised in manufacture of containers, which are a distinct final product, which is exempt from payment of duty, as manufactured without the aid of power, and as such, the credit was not available to the appellants for the duty paid on tin sheets, as the same was not permissible under Rule 57C of the Rules. A demand for Rs. 6,44,906/- was raised and after issue of Show Cause Notice, adjudication proceedings were conducted. The appellants contested the same on merits as also on the issue of the demand being barred by the limitation. The Collector of Central Excise, Baroda, however, confirmed the said demand, vide Rule 57-I of the Rules read with Section 11A(1) of the Act, and also imposed personal penalty of Rs. 50,000/- vide Order-in-Original No. 92/MP/91 dated 28-10-1991.

3. In the appeal filed vide Section 35B of the CESA, 1944, submission was made before the WRB of the Tribunal that though the entire demand was hit as time barred, the appellants would desire to get the issue adjudicated upon on merits. Arguing on merits, Mr. Willingdon Christian, the Ld. Advocate for the appellants appears to have submitted that tin sheets are identifiable as packaging material, and sheets as such obviously cannot be used for packing and the same has to be converted in the form of containers, and though, thereby an item classifiable under T.I. 8312.19 would come into existence, the identity remains to be t