H.R. Syiem, Member (T)

1. This appeal has been filed by Orient Paper Mills, Brajrajnagar, Orissa against the Order No. 5/OR of 1980 dated 31-3-80 of the Appellate Collector of Central Excise, Calcutta. The dispute is regarding a demand for 3,93,852.82 made by the Superintendent of Customs and Central Excise, O.P. Mills, Brajrajnagar by letter C. No. PR-4/OPM/78/ 1421 dated 9-9-78 in respect of wrapper paper said to have been cleared between 16-3-76 so 30-11-76 by O.P. Mills. This demand was endorsed by the Assistant Collector of Central Excise, Sambalpur who, by his order (original) No. 17/3/ 79/1 dated 4-5-79, ordered O.P. Mills to pay forthwith the demanded amount of Rs. 3,93,852.82. The dispute arose because from 16-3-76, duty on wrapper paper became leviable ad valorem. The Central Excise contend that the Mills should pay duty on its wrapper paper as wrapper paper before it is taken for use to wrap other papers in. The Mills reject this contention saying that they pay duty on the wrapper paper when it is finally removed from the factory after other papers are wrapped in it. The duty on the contents which are wrapped in the wrapper paper is calculated on the total value which includes the value of the wrapper paper. To pay duty on the wrapper paper before it is used as wrapper for other paper as demanded by Central Excise would result in paying duty twice on the wrapper and this is contrary to the law. The wrapper does not become marketable till it is removed with its contents, at which time, it pays duty as part of the contents.

2. The learned counsel for the appellant urged all the above before the Tribunal at the hearing on 3-5-83. She also urged that the same question was decided by a Bench of this Tribunal in Rayalaseema Paper Mills Ltd. v. The Collector of Central Excise, Hyderabad-1983 ELT 517, when the Bench decided that duty on wrapper paper cannot be levied twice. The counsel urged that even proforma credit under Rule 56A was denied them under the untenable plea that the wrapper paper had not been brought from outside but had been manufactured within the same factory. The Central Excise authorities held that the rule would not permit credit in this case as the wrapper could not be said to be a component or material used in the manufacture of the paper which are wrapped in the wrapper paper. The learned counsel ended by saying that the demand dated 9-9-78 was for the period 8-3-76 to 31-11-76 and so was time-barred.

3. The learned counsel for the appellant also quoted the judgment of the Bombay High Court in Acme Mill Industries (P) Ltd. v. Inspector of Central Excise, 1980 ELT 156 (Bom.), in which the High Court ruled that if goods were cleared openly and with the knowledge and consent of the department, the provisions of Sub-rule (2) of Rule 9 will not be attracted.

4. The learned counsel for the department argued that there was nothing wrong with double taxation and that it all depended on the exigencies of public interest. Where the taxing authorities wish to assess and collect duty twice on a commodity, it cannot be said that there was anything inherently wrong in such a procedure. In support he quoted a judgment in MANU/SC/0299/1978 : AIR 1979 SC 321. In respect of Rule 56A, the counsel for the department argued that the explanation provided in this rule is effective only from 1-7-80. The wrapper paper which is the subject of dispute in this case was not brought from outside but was manufactured by Orient Paper Mills in the same factory in which the contents were also manufactured. Nor can it be said that the wrapping paper was used in the manufacture of -the contents, as for example, when the paper is coated, impregnated or otherwise treated in which case it can be claimed that the wrapper paper has been used in the manufacture of other finished products. The time bar was not applicable since the wrapper paper was being assessed provisionally and the demand was only the result of the final assessment.

5. The