R. Jayaraman, Member (T)

1. Both the aforesaid appeals are against the same order passed by the Collector of Central Excise (Appeals) bearing No. SKM-1923/89 B-II dated 19-9-1989.

2. The facts of the case can be briefly stated as below:

The appellants are manufacturing P. or P. Medicaments falling under Chapter sub-heading No. 3003.19 of Central Excise Tariff. They are working under the modvat scheme in respect of the inputs permitted under the scheme. The disputed input is aluminium foil, which they brought under modvat scheme and sent the aluminium foil, under Rule 57F outside to job workers for conversion into sachets for packing of medicines. These aluminium foils at the time of receipt in their factory are laminated and printed with the details of the medicines and also bear the name of the manufacturer directions for use etc. These foils, on their receipt in their factory were entered into RG 23 register and credit taken, thereafter, they were sent for conversation into sachets by the outside job workers by virtue of the permission granted under Rule 57F. It was alleged by the Asstt. Collector that modvat rules do not permit packaging materials, which are not ready for use for packing the final product. In this view, he held that only the sachets which are ready to use for packing the medicaments should have been declared as input in the declaration filed under Rule 57G. The Assessee has also not paid duty on the sachets because of the permission granted under Rule 57F. Hence, the modvat credit taken on printed aluminium foils is not entitled to them. In the adjudication proceedings held by the Asstt. Collector, he confirmed the show cause notice issued and directed the reversal of the credit amounting to Rs. 28,71,946.94. When the matter was taken up in appeal by the assessee, the Collector (Appeals) allowed the assessee's appeal on the ground of time bar but dismissed their plea that aluminium foils is packaging materials in respect of which credit is admissible. In other words, the Collector (Appeals) confirmed the demands for a period of six months from the relevant date and dismissed their appeal on merits. The assessee have come in appeal against the order of the Collector (Appeals) dismissing their appeal on merits and the Department have come up in appeal against the same order of the Collector (Appeals) allowing the assessee's appeal on the ground of time bar.

3. Shri Hidayatullah, the Ld. Sr. advocate, after stating the facts of the case, pointed out that while the Asstt. Collector alleged that aluminium foils were not in ready to use condition as packaging materials and Rule 57F permitted only such packaging materials, which were ready to use and hence disallowed the modvat credit, the Collector (Appeals) held that the facility under Rule 57F(2) was provided only for sending the inputs outside as such or after the inputs had been partially processed during the course of manufacture of final products. The said rule does not permit removal of inputs of packing material , viz. foils for sachets and the assessee can declare sachets as final product and avail of the facility under Rule 57F(2) for job work and pay duty on sachets afterwards. In this view, he confirmed the demand limited to a period of six months. The arguments of Shri Hidayatullah could be briefly summed up as below :

The appellants filed the declaration showing the inputs viz. aluminium foils as packing materials. They applied for permission to send this material outside under Rule 57F(2) for converting into sachets and this permission was granted on 28-6-1986; only after 2 years on 7-4-1988, an objection was raised that credit could not be taken on the aluminium foil which were not directly used in the packing of the final product and the packaging materials referred to in Rule 57F could only be those, which were ready to use as packaging materials. This contention has been upheld by the Asstt. Collector wrongly. Rule 57A clearly specifies that th