H.R. Syiem, Member (T)

1. By his Order No. 480/Cal/84, dated 10-4-1984, the Collector of Central Excise (Appeals), Calcutta decided that screw caps used or Horlicks bottles manufactured by M/s. HMM Limited, Calcutta were very much inputs in terms of Notification No. 201/79-C.E., as well as being components for the manufacture of the finished product. This was contrary to the order of the Superintendent of Central Excise, dated 5-1-1984 who observed that screw caps fitted on Horlicks bottles were not components. The Collector (Appeals) held that the packing of the Horlicks in bottles was not complete unless it was capped. Since tariff item IB central excise related to prepared and preserved foods put in unit containers and ordinarily intended for sale, the composition of packed Horlick bottles is not just Horlicks powder but also the metal screw caps, bottles, labels, seals, etc. Materials used in bringing a substance up to the excisable stage can safely to considered inputs.

2. The learned counsel for the department Mr. Sundar Rajan argued that a screw cap can never be a component part or an ingredient of the contents of these goods, meaning the Horlicks, which is a health drink. He quoted 1979 Vol 43 STC page 141, in which the High Court at Allahabad decided that a gramophone needle is not a part of a gramophone even though it is necessary for the functioning of the gramophone. Even though the gramophone cannot run without the needle, the needle is still not a part of the gramophone and is not a component part of the gramophone. In 1969 Vol 23 STC page 306, the Allahabad High Court decided that a diesel engine is not a part of a motor car unless it has been specially adapted for such a motor car. In 1977 (40) STC page 437 in respect of copper wire, the High Court decided that a copper wire is not a component part of a transformer. Similar rulings were given by other High Courts in 1964 (15) STC page 734, 1980 (45) STC page 229, and by this Tribunal in 1985 (19) E.L.T, page 96. The fact that the goods under item IB have to be sold in unit containers, and that the unit containers have to have the screw caps to retain the finished product, namely, Horlicks, will make no difference to his proposition. The item descriptions are only for the purpose of levy of duty for the particular item. They do not lend support to the party's proposition that the screw cap forms an ingredient or component of the finished product, the malted milk drink. At the material time, goods falling under item 68 must be used as raw materials or component parts of the finished goods. No body can suggest that a screw cap on the bottle forms a raw material or component part of the finished goods Horlicks milk powder.

3. The learned counsel for M/s. HMM Ltd., said the D. 3 was filed on 13-10-1982 and the period of dispute was for October, 1982 and later. Notification No. 201/79-C.E. allowed credit of duty paid on the inputs if the inputs go as raw materials and component parts. It is not necessary that the raw material should form a physical ingredient only of the finished goods. It can satisfy the demand of the notification if it forms a part of the package presented for assessment before the Central Excise proper officer. The goods in their case are prepared and preserved foods ordinarily put up for sale in unit containers. In 1982 E.L.T. 379 order in review No. 15-17 of 1982 dated 14-1-1982, the Government of India gave a decision that will go in their favour. He said that the 1979 decision of the Allahabad High Court on the gramophone needle is not applicable because the needle does not form a part of the gramophone. In 1983 E.L.T. 1263 regarding M/s. Ballarpur Industries, the Bombay Bench of the Tribunal held that sodium sulphate used in the manufacture of paper was exempted from duty under Notification No. 201/79-C.E. which exempts excisable goods in the manufacture of which, goods falling under item 68 have been used, to the extent of duty paid on the