R. Jayaraman, Member (T)

1. This is an appeal directed against the order-in-appeal bearing No. SKM-623/90.B.I. passed by the Collector of Cen. Excise (Appeals), Bombay dated 8-5-1990.

2. The appellants herein are the manufacturers of biscuits and confectionery and they have opted for modvat scheme. They claimed modvat benefit for certain goods viz. M.G. Poster paper, paper, printing inks, plain aluminium foils etc. It was alleged by the Department that these inputs are neither consumed as raw materials for their final products nor are they directly used as packing materials. These inputs are captively consumed for the manufacture of intermediate products viz. printed/laminated papers and printed/laminated aluminum foils on which no duty is paid. These intermediate products also cannot be said to be arising during the course of manufacture of their final product. Therefore, modvat credit in respect of the duty paid on the aforesaid products is not admissible. Another objection taken by the Department was that the inputs 'refined coconut oil', mono acid calcium phosphate sodium met sulphate, printing ink auxiliaries, printed cartons and thinner are not mentioned in the declaration. 10 show cause notice were issued by the Department. The issues involved as identified by the Asstt. Collector in the show cause notice dated 3-9-1987 are the following:

(i) Non-filing of declaration in the prescribed proforma during the period from 4-3-1987 to 18-6-1987 and the amount of credit availed during the said period is Rs. 50,06,431.18 ;

(ii) Inadmissibility of credit availed in respect of raw materials used in the manufacture of intermediate products such as printed/laminated aluminium papers and printed/laminated aluminium foils; and

(iii) non-inclusion of certain inputs in their declarations dated 4-3-1987 and 6-3-1987.

3. As regards the issue at Sr. No. (i), it was not adjudicated upon by the Asstt. Collector on account of the fact that the appellants have filed Writ Petition in the Bombay High Court and obtained stay order for the recovery of the demand for Rs. 50,06,431.18. The other 2 issues were taken up by the Asstt. Collector for adjudication and in the adjudication proceedings concluded by the Asstt. Collector, demand to the extent of Rs. 1,17,65,507.18 was confirmed. The matter was taken in appeal before the Collector (Appeals) who in the impugned order allowed the modvat credit only in respect of refined coconut oil but rejected the modvat credit in respect of other items and confirmed the order of the Asstt. Collector. The present appeal is against the aforesaid order.

4. Shri Setalwad, the learned advocate, on behalf of the appellants identified the following facts involved in the appeal:

The appellants are manufacturers of biscuits, confectionery and chocolates and these products can be cleared and sold only when they are wrapped either in paper or aluminium foil which are printed in different colours and/or laminated. Printing is necessary to identify the products of the manufacturers apart from indicating the details of price and other particulars as required under the Packaged Commodities Rules. These products cannot be sold without such packing. These ready-to-use packaging materials are made from duty paid aluminium foils and paper and other materials' such as printing inks, wax and certain chemicals for lamination are obtained by them which are used for waxing/laminating/printing of aluminium foils and paper to make them ready to use as packaging materials. The appellants claimed modvat credit in respect of such duty paid ready to use packaging materials purchased as such. They also claimed modvat credit in respect of inputs used for preparation of ready to use packaging materials since they were also prepared in their own factory. The Department has not objected to the modvat credit in respect of duty paid on 'ready to use printed packaging materials' purchased as such but raised objection only in respect of inputs used fo