Ponds (India) Ltd. vs Collector of Central Excise

Abdul Hadi, J.—Pursuant to the order of this Court u/s 35G(3) of the Central Excises and Salt Act, 1944 (hereinafter referred to as ''The

Act'') dated 22-11-1989 in R.C.P. No. 20 of 1989, directing the Customs, Excise and Gold (Control) Appellate Tribunal, Southern Regional

Bench of Madras, to refer four questions of law specified below, to this Court for its opinion, the said Tribunal has referred the same and thus this

R.C. No. 1 of 1990 is before us. The said four questions arise out of the said Tribunal''s order dated 15-10-1987 in Excise Appeal No. 271 of

1987 (MAS.) filed by the appellant therein, Pond''s (India) Limited (the applicant before us).

The said questions relate to scheme known as MODVAT. MODVAT is short form of Modified Value Added Tax. This scheme enables the

manufacturers, whose manufactured products (termed as ""final products"") suffer excise duty under the Act, to obtain instant and complete

reimbursement of specified duty paid on the goods used in or in relation to the manufacture of the said products. (These goods are referred to as

inputs""). In other words, the charge of excise duty on the abovesaid final products in only on the value added to the said inputs, which had already

suffered duty. This scheme was introduced on 1-3-1986 by inserting Rule 57-A to Rule 57-N under the new section or heading ""AA. Credit of

duty paid on excisable goods used as inputs"" to the Central Excise Rules, 1944. It is a modification or improvement of the pre-existing proforma

credit scheme. Hence it is known as Modified Value Added Tax or MODVAT shortly. The object of the scheme is to eliminate the cascading

effect on the excise duty levied on the final products, or, in other words, to avoid payment of duty on earlier duties paid.

The applicant herein is a manufacturer of cosmetics. It sought permission of the Assistant Collector of Central Excise, Madras-5 Division for

taking the abovesaid MODVAT benefit on certain raw materials or plastic granules, known as LDPE, HDPE and PVC compound used in the

manufacture of plastic jars etc., used as containers for the excisable goods, shampoo, talcum powder and cream manufactured by it. Admittedly

those plastic jars, etc. used as containers are exempted from excise duty. But the abovesaid new materials, which went to make up those

containers suffered excise duty. Further, admittedly, the applicant did not manufacture the said containers in its own factory, using the abovesaid

raw materials, but instead purchased those raw materials and sent them to processors for the manufacture of the said containers and after the said

manufacture, brought the containers to its factory and used them in packing its abovesaid excisable final products, viz., shampoo, cream, talcum

powder etc.

The Assistant Collector by his order dated 18-7-1986, has held that the applicant is not eligible to avail the said MODVAT credit on those raw

materials under the abovesaid Rule 57-A and that consequently it cannot also seek permission to operate under Rule 57-F(2) thereof. The

Assistant Collector has also found that Rule 57-D(2) thereof also has no application. The said order of the Assistant Collector was also

concurrently upheld by the Collector of Central Excise (Appeals), Madras lay his order dated 29-1-1987 in the first appeal filed by the applicant

and by the abovesaid Tribunal in the abovesaid second appeal filed by it. viz., Excise Appeal No. 271 of 1987 (MAS). Subsequently the applicant

filed the reference application u/s 35G(1) of the Act to the Tribunal. But that was also dismissed by an order dated 10-1-1989, holding that there

was no question of law arising out of the abovesaid Tribunal''s order dated 15-10-1987. Then the application filed in R.C.P. No. 20 of 1989 in

this Court u/s 35G(3) of the Act resulted in the above order dated 22-11-1989. Pursuant to the said order, four questions have been referred to

us, those questions are :-

Is it correct in law for the Tribunal to hold that if the duty paid on LDPE, HDPE, PVC compound etc. is not allowed MODVAT credit as inputs

for cosmetic and toilet preparations, in the facts and circumstances of the case, there will be no cascading effect merely because the plastic

containers made out of them are exempt from duty ?

Is it correct in law for the Tribunal to hold that intermediate products are necessarily those which have to undergo further processing in the

factory of production for further use in the manufacture of the final product when the word ''intermediate'' only means ''coming between two things

as regards time, place or order'' ?

Is the Tribunal correct in law in holding that the manufacture of plastic containers is not an intermediate stage for completion of the manufacture

and clearance of cosmetic and toilet preparations particularly with reference to Section 2(f) of the Central Excises and Salt Act, 1944, read with

Chapter Note No. 4 of Chapter 33 of the Schedule to the Central Excise Tariff Act, 1985 ?

Is the Tribunal correct in law in not taking into consideration the expression used in Rule 57-A viz. duty paid on the ''goods used in or in relation

to the manufacture of the said final products'' as an integral part thereof and thus holding that the raw materials for the containers are not eligible for

MODVAT benefit ?

The relevant portions of the abovesaid Rule 57-A are as follows :-

Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the ""final products""), as the

Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the

additional duty u/s 3 of the Customs Tariff Act, 1975 (51 of 1975) as may be specified in the said notification (hereinafter referred to as the

specified duty"") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the ""inputs"") and

for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act,

as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the

notification..........

Explanation. - For the purposes of this rule, ""inputs"" includes -

(a) inputs which are manufactured and used within the factory of production in or in relation to, the manufacture of final products, and

(b) paints and packaging materials, but does not include -

(i) ............................

(ii) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is

being availed of for packaging any final products;

(iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the

final products u/s 4 of the Act;

(iv) ..............

(v) plywood for tea chests;

The above-referred notification under Rule 57-A has also been issued by the Central Government and admittedly the above-referred to final

products manufactured by the applicant and the above-referred to raw materials used in the manufacture of the abovesaid containers respectively,

come under Chapters 33 and 39 of the Schedule to the Central Excise Tariff Act, 1985 (Central Act 5 of 1986) as per the said notification. It is

needless to say that as per the charging section, viz., Section 3 of the Act, excise duty is leviable on excisable goods at the rate set forth in the

Schedule to the above-referred to Central Excise Tariff Act, 1985. Here it is also necessary to note the definition of the term ""manufacture

referred to by the learned counsel for the applicant. The relevant portions of the said definition u/s 2(f) of the Act are as follows :-

manufacture"" includes any process, -

(i) ............

(ii) which is specified in relation to any goods in the section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting

to manufacture.

One of the above-referred to Chapter Notes, viz., Chapter Note No. 4 to Chapter 33 runs as follows :-

In relation to products of heading Nos. 33.03, 33.04 and 33.05 conversion of powder into tablets, labelling or relabelling of containers

intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to

the consumer, shall be construed as ""manufacture"".

There is no dispute that the above-referred to excisable goods of the assessee come under the above-referred to headings.

The above-referred to Rule 57-D(2) runs as follows :-

(2) Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come

into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the

whole of the duty of excise leviable thereon or chargeable to nil rate of duty :

Provided that such intermediate products are -

(a) used within the factory of production in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a

hundred per cent Export-Oriented Unit) on which the duty of excise is leviable whether in whole or in part; and

(b) specified as inputs or as final product under a notification issued under rule 57A."" Rule 57-F prescribes the manner of utilisation of the inputs

and the credit allowed in respect of duty paid thereon the inter alia provides for the removal of the abovesaid inputs from the factory with the

permission of the Collector of Central Excise, as if they have been manufactured in the said factory.

The learned Senior Counsel Mr. K. Parasaran mainly makes the following submissions :- The Tribunal erred in holding that the abovesaid

Plastic granules"" are not ""inputs"" within the meaning of that term in the above-referred to Rule 57-A. Further, the expression ""in relation to"" used in

the main part of Rule 57-A is of widest amplitude. The Tribunal should have also given a liberal interpretation to the abovesaid term ""inputs"".

Further, if two interpretations are possible, the interpretation in favor of the assessee should have been adopted. The learned Senior Counsel also

relies on several decisions [some of which are also judgments of different Benches of the Customs, Excise and Gold (Control) Appellate Tribunal],

which will be referred to in the course of the discussion.

On the other hand, Mr. Jayachandran, learned Additional Central Government Standing Counsel reiterates the reasonings found in the orders of

the first two authorities below and the Tribunal and submits that the abovesaid plastic granules are neither ""inputs"" under the abovesaid Rule 57-A

nor ""intermediate products"" under Rule 57-D(2) and that the claim of the applicant cannot be accepted since the abovesaid containers are

exempted from duty. He also submits that the relevant circular issued by the Board in interpreting the (some of which are also decisions given by

the different Benches of the abovesaid Tribunal), which will also be considered during the course of the discussion.

We have carefully considered the rival submissions and the authorities cited. Though both the sides rely on Tribunal decisions also, it is rightly

agreed by both of them that the reasoning found in those decisions could have at best only persuasive effect before us.

The main question to be considered is whether the abovesaid plastic granules could be taken as ""inputs"" within the meaning of that terms in Rule

57-A, more particularly in the above-referred to explanation therein. The said explanation, inter alia, says ""inputs"" includes packaging materials.

But, the said terms does not include, inter alia, those packaging materials, in respect of which any exemption to the extent of the duty of excise

payable on the value of packaging materials is being availed for packaging any final products. So far as the term ""packaging materials"" in 1990 (30)

ECR 1 3 , the East Regional Bench, Calcutta observed as follows while dealing with the question whether the MODVAT benefit could be given in

respect of tin plates used for making material containers, which were used for packing the manufactured excisable goods, viz., vegetables products

:-

In our opinion, the question for determination turns on the expression packaging materials which are included in the scope of the term ""inputs"" in

the explanation to Rule 57A. The term ""packaging"" is described in ""Readers Digest Universal Dictionary ''as material used for packaging''.

Packaging material which is the crucial expression is thus different from package, just as, say, dress material is different from dress. Just as dress is

made from dress material, package is made from packaging material. The specific exclusion in the Explanation to Rule 57A of packaging materials

in respect of which any exemption to the extent of ''duty payable'' on the value of such packaging materials is availed of and of packaging materials

the cost of which is not included in the assessable value of the final product u/s 4 of the Central Excises and Salt Act, however, tend to point to the

possibility of the expression packaging material being used refer to packages themselves. But we cannot go beyond the normal meaning of the

term. Thus, packaging material is different from package or container. Further, the specific exclusion of the item ""plywood for tea chests"" is also a

pointer in this regard. Wood is not package by itself but a packaging material to make tea-chests. Because of its specific exclusion it stands

excluded from the scope of Modvat benefit available to packaging material. There is no such exclusion affecting tin plates. Their uses are similar.

Both are used to make packages or containers for packaging excisable goods. Since tin plates/tin sheets are used for making metal containers in

which vegetable product is packed they are packaging materials, which are eligible inputs which are used in relation to the manufacture of

vegetable products.

Thus observing, the said Tribunal has held that MODVAT benefit is available in the abovesaid case.

This view has also been followed by the Western Regional Bench of the Tribunal at Bombay in 1992 (39) ECR 254 while dealing with the

question whether the MODVAT benefit could be given to printed aluminium foils used to make sachets (containers) for packing the excisable

goods, viz., medicaments. In the said decision it observed thus :-

The term ''packaging materials'' has a wider connotation and meaning. This is also evident from the fact that even plywood for tea chests are

recognised as packaging materials but are sought to be specifically excluded, while including the other packaging materials. Hence what is required

to be looked into is, whether the material received could be known to have its normal use as packaging materials and is also established to be used

as packaging materials, which are permitted under Rule 57A. If the intention was only to permit ready to use containers such as boxes or bottles,

then the term used would have been ''package or container.'' In the absence of any such restrictive meaning provided, the term ''Packaging

material'' has to be interpreted as such and cannot be interpreted in the restricted manner.

We are in agreement with the abovesaid view expressed in 1990 (30) ECR 1 3 and 1992 (39) ECR 254 . We may also observe that given the

abovesaid meaning for the term ""packaging materials"", the above referred to plastic granules will not also come under sub-clause (ii) of clause (b)

in the above-referred to explanation under Rule 57-A, since admittedly those plastic granules are not packaging materials in respect of which any

exemption is being availed of for packaging any final product.

No doubt in the above referred to 1992 (39) ECR 254 , the decision of the South Regional Bench, which is under review in the present case

(and which also has been reported in 1988 (18) ECC 102 has been distinguished thus :-

In any case, we are of the view that the test that should be applied is, whether the material is identifiable as a packaging material and its normal

usage is for packing purposes and it has been brought only for the packaging purposes. If this test is satisfied, neither the Rule 57A could be said

to deny the benefit nor the Rule 57F(2) could be refused in such cases.

A similar distinction was also sought to be made by the same Western Regional Bench of the Tribunal in 1991 (34) ECC 111 The learned Senior

Counsel for the applicant submits that this distinction sought to be made out by the said Bench of the Tribunal in 1992 (39) ECR 254 is not correct

since, once the abovesaid plastic granules could be and are used as packaging materials for making the abovesaid containers, they would also

come under the term ""packaging materials"". We see force in this submission. The net result is we hold that the abovesaid plastic granules are inputs

within the meaning of the said terms in Rule 57-A.

That apart, we find that the view expressed by the Supreme Court in Collector of Central Excise, Calcutta-II Vs. Eastend Paper Industries

Ltd., also would lead to confusion that MODVAT benefit should be given in the present case. That case before the Supreme Court related to the

pre-existing proforma credit scheme under Rule 56-A and the question there was whether the said proforma credit could be given to certain paper

which was used by the assessee for wrapping the excisable goods, which was also certain other kind of paper. In that context, the Supreme Court

has held that the said credit could be given to such wrapping paper and observed as follows :-

As the Act does not define goods, the legislature must be taken to have used that word in its ordinary dictionary meaning. The dictionary meaning

of the expression is that to become ''goods'' it must be something which can ordinarily come to the market to be bought and sold and is known to

the market as such. The Tribunal found, and there was material for the Tribunal to do so, that the market in which articles in question were sold

were paper packed and wrapped in paper. Therefore, anything the enters into and forms part of the end-product and must be deemed to have

been used in completion or manufacture of the end product. This Court in the case of Empire Industries Limited and Others Vs. Union of India and

Others, has explained the concept of ''process'' in Excise Law. In view of the principle laid down therein and other relevant decisions, processes

incidental or ancillary to wrapping are to be included in the process of manufacture, manufacture in the sense of bringing the goods into existence as

these are known in the market is not complete until these are wrapped in wrapping paper. In J.K. Cotton Spinning and Weaving Mills Co. Ltd.

Vs. Sales Tax Officer, Kanpur and Another, , this Court while construing the expression ''in the manufacture or processing of goods for sale'' in the

context of Sales Tax Law, though the concept is different under the Excise Law, has held that manufacture of goods should normally encompass

the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process, this Court further

emphasized, is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would

be commercially inexpedient, articles required in that process, would fall within the expression ''in the manufacture of goods''........ To be able to

marketed or to be marketable, it appears to us, in the light of facts in the appeals, that it was an essential requirement to be goods, to be wrapped

in paper. Anything required to make the goods marketable, must form part of the manufacture and any raw material or any materials used for the

same would be component part for the end product. In our opinion, the Tribunal was right in the view it took. There is no ground to interfere in

these appeals.

The learned Senior Counsel for the applicant emphasizes that in the present case also, the excisable goods, cream, talcum powder, etc. cannot

be marketed without the abovesaid containers. In this context, he also relies on the decision in State of Tamil Nadu v. V. V. Vanniaperumal & Co.

(1990) 76 STC 203 FB which has held that when oil is sold in tin containers, what was sold was a ""tin of oil"". Though this case related to sales tax,

we think, we can draw inspiration from the following observation made therein and apply the reasoning adopted there to the present case also :-

As we said above only tin oil is sold. There is no intention for sale or purchase of tin. The intention is to purchase of oil which of course is in tin.

Therefore, whatever is the price paid, it must be taken to be the price of the oil. May be if more oil is sold and delivered in a container brought by

the purchaser the price may be lesser than the oil sold in tin container, but nevertheless, when oil is sold in tin, the price that is paid is the price of

the oil. Therefore, total turnover of the price has to be taxed and there is no question of taxing separately for the price of oil and price of tin at

different rates.

In this connection, the learned Counsel also relies on Punjab Distilling Industries Ltd. Vs. The Commissioner of Income Tax, Simla, . It is no

doubt an Income Tax case and the facts are that the assessees therein sold liquor in bottles and the sale price included certain sum as price for

bottles also and a further sum was also collected by the buyer as security deposit. The Supreme Court held in that context that the receipt by the

assessee-seller of the security deposit was also revenue receipt since sale was liquor with the bottle and that hence the security deposit was only

part of the price paid. In this connection, the Supreme Court observed thus :-

It is clear to us that the trade consisted of sale of bottled liquor and the consideration for the sale was constituted by several amounts respectively

called, the price of the liquor, the price of the bottles and the security deposit. Unless all these sums were paid the appellant would not have sold

the liquor. So the amount which was called security deposit was actually a part of the consideration for the sale and therefore part of the price of

what was sold.

Therefore, the learned Senior Counsel submits that the abovesaid plastic granules, which were utilized for manufacturing the abovesaid containers

for packing the abovesaid excisable goods like shampoo etc. and for making them marketable, would be component parts for the abovesaid

goods which are the end-products. We see force in this submission also in view of the abovesaid observations in the Supreme Court decision and

the Full Bench decision of this Court.

In the main part of Rule 57-A also, the expression used is ""goods used in or in relation to the manufacture of the said final products (hereinafter

referred to as the ""inputs"")"". The said senior Counsel is also right in his submission that wide connotation should be given to the above words ""in

relation to"". (Vide Doypack Systems Pvt. Ltd. Vs. Union of India (UOI) and Ors, .

We may also point out that in Collector of Central Excise, New Delhi Vs. Ballarpur Industries Ltd., , the Supreme Court also follows the

abovesaid Collector of Central Excise, Calcutta-II Vs. Eastend Paper Industries Ltd., arose in a different set of facts and context.].

We have already pointed out that u/s 2(f) of the Act, the term ""manufacture"" would also include any process which is specified in relation to

any goods in the Section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture. We have also

mentioned earlier that Chapter Note No. 4 of Chapter 33 of the abovesaid Schedule also states that adoption of any treatment to render the

products marketable to the consumer shall be construed as a manufacture. Therefore in the main part of Rule 57-A also, the term ""goods"" used in

or in relation to the manufacture of the said final products (hereinafter referred to as the ""inputs"") would cover the above-referred to plastic

granules also.

Further, it must be noted that the abovesaid explanation to Rule 57-A contains only an inclusive definition of the term ""inputs"". In this

connection, the learned Senior Counsel also relies on the following observation in The State of Bombay and Others Vs. The Hospital Mazdoor

Sabha and Others, :-

It is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. Where we are dealing

with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation.

It cannot also be said that, because the abovesaid containers are exempted from duty, the duty paid on the abovesaid granules, which go to

make up those containers cannot get reimbursement under the MODVAT scheme. Once those granules are held to be ""inputs"", the abovesaid Rule

57-D(2) also will come to the aid of the applicant to claim MODVAT benefit in respect of them. Rule 57-D(2) says that credit of specified duty

allowed in respect of any inputs shall not be denied on the ground that any intermediate products have come into existence during the course of

manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable

thereon. Here again, for the term ""manufacture"", the abovesaid Section 2(f) definition read with the abovesaid Chapter Note No. 4 to Chapter 33

would apply and so, the abovesaid containers could be taken as the abovesaid ""intermediate products"" which have come into existence ""during the

course of manufacture of the final product"". In such a case, the requirement mentioned in the proviso to Rule 57-D(2) will stand satisfied since the

abovesaid containers, the intermediate products, are admittedly ""used within the factory of production in the manufacture of a final product"" and

specified as inputs or final product under the Notification issued under Rule 57-A.

This apart, it cannot also be said that there is no cascading effect if the value of the containers which are exempt from duty are actually charged

to duty subsequently when the said containers are used to pack the final products (cream, etc.) and are actually get integrated in the said final

products. The purpose for which the exemption was granted to those containers would also be nullified if their value is to be taxed subsequently

when they are used to pack the abovesaid cream etc.

In 1990 (48) ELT 50 the Tribunal, East Regional Bench, Calcutta, no doubt observed differently [from what it observed later in 1990 (30)

ECR 1 3 as stated above]. Its observation is as follows :-

In the explanation to Rule 57-A relating to Modvat Credit which is what is claimed by the appellants, the term - input - has been given an inclusive

coverage whereby packaging materials are included. The inputs in question are polythene granules. These are not packing materials, as such. Using

them, bags which are packaging materials are manufactured. The bags represent the final stage of manufacture as far as they are concerned. They

do not constitute intermediate products for the detergent powder. It has been contended by the appellants that the term - intermediate product -

has not been defined in the Central Excise Rules. The term can only mean the products obtained from the raw materials in the course of

manufacture of the final product. Here the final product is detergent product and it is not manufactured from either polythene granules or plastic

bags which are made therefrom to enable the latter to be considered as the intermediate products for detergent powder.

Here in the abovesaid 1990 (48) ELT 50 the Tribunal has not become in mind the actual meaning of the words ""packaging materials"" and went

wrong in saying that polythene granules ""are not packaging materials as such"". Bags which were manufactured using those polythene granules were

instead held by the Tribunal in the above case as packaging materials. We are of the view, as indicated above that those bags are only packages or

containers and cannot be strictly called ""packaging materials"". Further, the Tribunal erred in saying that those bags do not constitute intermediate

products for the detergent powder. As already indicated in view of Section 2(f) of the Act and the abovesaid Chapter Note No. 4 to Chapter 33,

those bags would be ""intermediate products"" (for the abovesaid detergent powder) spoken to in Rule 57-D(2).

Likewise, the Tribunal in 1990 (29) ECC 139 ] and 1990 (31) ECC 418 , which were relied on by the Additional Central Government

Standing Counsel, went wrong cannot be said to be correct in holding that sand moulds prepared using certain chemicals were not intermediate

products, coming into existence during the course of manufacture of the final product, iron and steel, on the ground that the said sand moulds were

independently manufactured. Here again, Section 2(f) definition read with the abovesaid Chapter Note No. 4 was not considered.

The learned Additional Central Government Standing Counsel also made an attempt to rely on Rule 57-C. But Rule 57-C only says that on

credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the

whole of the duty excisable thereon. But, in the present case, the abovesaid containers are not final products and so, Rule 57-C cannot have any

application.

Further, it is settled law that even if two views are possible, the view favorable to the assessee is to be followed [vide Collector of Central

Excise, Bombay-I and Another Vs. Parle Exports (P) Ltd., . No doubt, the learned Additional Central Government Standing Counsel relies on the

same decision to contend that the interpretation given by the Board should be given weight. In this connection, he also relies on Collector of

Central Excise, Guntur Vs. Andhra Sugar Ltd., Venkataraypurama, to contended that contemporaneous exposition by the Board should be

accepted. What was observed in Collector of Central Excise, Bombay-I and Another Vs. Parle Exports (P) Ltd., is as follows :-

The principle is well-settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part

of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage & Others

v. Frederick Wilkinson 1878 (3) A.C. 355 that it is only, however, in the event of there being a real difficult in ascertaining the meaning of a

particular enactment that the question of strictness or of liberality of construction arises.

But, in the present case, we do not think that there is any real difficulty in interpreting Rule 57-A. No doubt, the Supreme Court in the above

decision also observed thus :-

It is a well-settled principle of interpretation that courts in construing a statue or notification will give much weight to the interpretation put upon it

at the time of enactment or issue, and since by those who have to construe, execute and apply the said enactments.

However, it is obvious that any interpretation put by Board''s circulars cannot be conclusive. In fact in Orient Paper Mills Ltd. Vs. Union of India

(UOI), cited by the learned Senior Counsel for the applicant, the Supreme Court has held that the directions issued by the Central Board of

Revenue cannot be binding on Courts or Quasi-Judicial Tribunals. In fact in that decision, the Supreme Court quotes the following earlier

observation in B. Rajagopala Naidu Vs. State Transport Appellate Tribunal and Others, :-

If the exercise of discretion conferred on a quasi-judicial tribunal is controlled by any such direction, that forges fetters on the exercise of quasi-

judicial authority and the presence of such fetters would make the exercise of such authority completely inconsistent with the well-accepted notion

of judicial process.

In the present case, one of the Board''s clarification was as follows :-

Rule 57A allows Modvat credit for ''packaging materials'' and not on raw materials for making such packaging materials. Packaging materials are

ready to use articles such as containers, boxes, cartons, bottles etc. Therefore modvat credit will be admissible for the duty paid on such ready to

use packaging materials but not on the raw materials such as plastic granules, steel sheets/strips etc. used for making packaging materials. Raw

materials like plastic granules or steel sheets/strips are general purpose articles which can be put to various uses, one of which is making of

packaging materials. These raw materials by themselves are not recognisable as packaging materials.

As already stated, we are unable to agree with this interpretation. We have already pointed out what actually is meant by packaging materials.

They only refer to the raw materials which go to make up the abovesaid containers. So, we hold that the abovesaid clarification given by the Board

is not correct.

The learned Additional Central Government Standing Counsel also relies on 1991 (52) ELT 592 . But the facts therein are different and the

decision may have no application to the present facts.

In the light of the above discussion, our answers to the above-referred to four questions are in the negative and in favour of the applicant.

Accordingly we answer this reference. In the circumstances, we make no order as to costs.