G. Sankarau, Member

1. This appeal is against the Collector (Appeals)'s order dated 27-9-1983. The facts of the case, in brief, are that the Respondents are engaged in the manufacture of wrapping and other varieties of paper. In accordance with the requirements of Rule 173C, the Respondents filed price lists Nos. 3/80 to 6/80. While giving his approval to the price lists, the Assistant Collector, Jabalpur ordered on 26-8-1980 that "wrapping paper used m packing reams/reels and reel core on which the paper is wound are packing materials. The cost of such packing shall be included in the assessable value of paper as per adjudication order No. V( 17)3-3/76/24689-90 dated 25-11-1976 passed by the Assistant Collector of Central Excise, Jabalpur". The matter was pursued in appeal. The appellant also took up the plea' that if the cost of packing was to be so included, then proforma credit (under Central Excise Rule 56A) of the duty already paid on the wrapping paper consumed for wrapping within the factory should be allowed. The Appellate Collector, in his order dated 17-9-1983, disposed of the appeal, following his decision in his order 105-CE/APPL/IND/81 and others, in Straw Products Ltd., Bhopal and another. In that order, the Appellate Collector decided against the assessee except as regards the plea of proforma credit of duty paid on the wrapping paper used in wrapping or packing of other varieties of paper which he held was admissible in terms of Rule 56A.

2. On behalf of the appellant, the learned SDR submitted that-

(i) The claim under Rule 56A was not taken up before the Assistant Collector, but before the. Collector (Appeals) for the first time. The latter, ought not to have taken up-.this ground for decision. He ought to have directed the Assistant Collector to adjudicate the issue.

(ii) Rule 56A does not contemplate proforma. credit of duty paid on wrapping/packing materials.

(iii) Wrapping paper is not used in the manufacture of other Varieties of paper or board. The process of packing or wrapping is not a process of manufacture. In support, he placed reliance on the reported decision in-

979 E.L.T. 457 (Cal.)

1979 E.L.T. 461 (Karnataka)

1978 E.L.T. 18 (Madras).

(iv) Rule 56A contemplates proforma credit of duty paid on raw materials and component parts used in the manufacture of excisable goods. Packing paper does not fall in this category. Nor does it fall in the category of finished products whose convenient distribution is one of the situations specified in Rule 56A.

(v) The Collector (Appeals)'s decision to the effect that the value of the wrapping paper used in wrapping/packing of other varieties of paper/board is to be included in the value of the wrapped or packed contents has not been challenged by the appellant by way of appeal.

3. On behalf of the Respondents, the learned Consultant submitted that-

(i) Packing/wrapping is a process of manufacture. That packing is an integral process of manufacture is supported by the Supreme Court decision in 1983 E.L.T. 1896.

(ii) The decisions in 1979 E.L.T. 461 and 1978 E.L.T. 18 were in the context of post-manufacturing expenses. The decision of the Madras High Court in Seshasayee Paper and Boards case - 1984 E.L.T. 3 was in the Respondents' favour.

(iii) Packing/wrapping paper and other varieties of paper/board fall under the same Tariff Item 17. Packing/wrapping paper becomes part and parcel of the paper which it packs/wraps. It is not charged for separately. It is, therefore, eligible for the benefit of Rule 56A. Reliance was placed on the observations in para 11 of the decision reported in the Orient Paper Mills case - 1983 E.L.T. 1813.

(iv) The distinction sought to be made by the Department between finished product and excisable goods has no basis. The packing/wrapping paper is, in fact, used for the more convenient distribution of other varieties of paper. This plea was put forth in case it is held that packing/wrapping is not a process of manufacture.

(v) The Appellate C