Holding

Plaster of paris used as inputs in the manufacture of sanitaryware is exempt under Notification No. 217/86 as amended.

Summary

The dispute centered on whether plaster of paris used to make moulds for sanitaryware qualifies as an "input" eligible for exemption under Notification No. 217/86, as amended by Notification No. 82/87, under the Central Excise Rules. Hindustan Sanitaryware & Industries, the respondent, claimed the exemption, but the excise authorities denied it; the Customs, Excise and Gold (Control) Appellate Tribunal reversed that decision and granted the exemption. The Collector of Central Excise appealed, contending that the plaster of paris moulds are classified as final products under the Central Excise Tariff Act and therefore ineligible for the input exemption. The Court examined the language of the notification, the amended table and the proviso, and held that plaster of paris used in the manufacture of sanitaryware is an input, while the final product (sanitaryware) is not exempt, so the exemption applies. Accordingly, the appeals were dismissed, leaving the Tribunal's order intact, and no costs were awarded.

Issues considered

Whether plaster of paris used to make moulds for sanitaryware constitutes an "input" eligible for exemption under Notification No. 217/86 (as amended by Notification No. 82/87).
Whether the proviso to the notification bars the exemption when the final product is itself exempt from excise duty.

Legislation cited

Central Excise Rules, 1944s. Rule 8(1)
Central Excise Tariff Act, 1985s. Schedule

Subjects

central exciseexemptioninputsplaster of parissanitarywareNotification 217/86Rule 8Customs Excise Tribunalinput vs final product

Judgment

A COLLECTOR OF CENTRAL EXCISE, NEW DELHI
V.

HINDUSTAN SANITARYWARE & INDUSTRIES

SEPTEMBER 10,2002

B (SYED SHAH MOHAMMED QUADRI AND S.N. VARIA VA, JJ.]

Central Excise Rules, 1944:

R.8(1)-Notification No. 217186 dated 2.4.1986 (as amended by
C Notification No. 82!87(E)-Exempting plaster of paris, used as input, from
excise duty-Manufacturer ofsanitaryware-Making moulds ofplaster ofparis
and using them as input in manufacturing sanitaryware as final product-
Claiming exemption of the Notification-Excise authorities declining to grant
'
benefit, but Tribunal holding that exemption Notification would apply-Held,
D plaster ofparis which is used as input in relation to manufacture ofsanitaryware
(final product), is exempt under the Notification as amended.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1627 of
I994.

E From the Judgment and Order dated 1.4.1991 of the Customs Excise
& Gold (Control) Appellate Tribunal New Delhi in E. Appeal No. 384 I/
90-C

WITH

p CA 6219-of 1994.

R.P. Bhatt G. Venkatesh Rao. K.C. Kaushik and B.K. Prasad, for
the Appellants.

B.C. Ahmed, for Mis Lawyers Associated.
G The following Order of the Court was delivered by

These two appeals arise from the judgments of the Customs, Excise and
Gold (Control) Appellate Tribunal in Order No. 304/91-C in E/Appeal No.
3841/90-C dated April 1, 1991 and in Order No. 600191-C in E/Appeal No.
H 224
C.C.E. v. HINDUSTAN SANITARYWARE& INDUSTRIES 225

2031 /9 l-C dated July 19, 1991. The judgment in Order No. 304/91-C in E/ A
Appeal No. 3841/90-C dated April I, 1991 is followed in Order No. 600/91-
C in E/Appeal No. 2031/91-C dated July 19, 1991.

The respondent, a manufacturer of sanitaryware, uses plaster of paris as
inputs for the final product of sanitaryware. The process involves making of
moulds from plaster of paris which are in turn used as inputs for manufacture B
of sanitaryware. Tbe rc·spondent claimed the benefit of exemption under
Notification No. 217/86 (as amended by Notification No. 82/87-CE.)

In these cases, though the Excise authorities declined to grant the benefit
of exemption, the Customs, Excise and Gold (Control) Appellate Tribunal set C
aside their orders and held that the exemption would apply to the respondent.

Mr. R.P. Bhan, learned senior counsel appearing for the revenue,
contends that as the moulds of plaster of paris are goods classified under the
Central Excise Tariff Act, 1985 they cannot be treated as inputs; they must
be treated a the final product and as they are exempted, the respondent is not D
entitled to the benefit of exemption under Notification No. 217 /86.

We are afraid, we cannot accept the contention of the learned senior
counsel.

The said Notification reads as follows:
E
"SPECIFIED GOODS USED WITHIN THE FACTORY OF
PRODUCTION IN THE MANUFACTURE OF FINISHED GOODS.

In exercise of the powers conferred by sub-rule (I) of Rule 8 of
the Central Excise 'Rules, I944, the Central Government hereby
exempts goods specified in column (2) of the Table hereto annexed F
(hereinafter referred to as 'inputs') manufactured in a factory and
used within the factory of production, in or in relation to the
manufacture of final products specified in column (3) of the said
Table, from the whole of the duty of excise leviable thereon, which
is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 G
of 1986) :

Provided that nothing contained in this Notification shall apply to
inputs used in or in relation to the manufacture of final products
which are exempts from the whole of duty of excise leviable thereon
or is chargeable to nil rate of duty. H
226 SUPREME COURT REPORTS (2002] SUPP. 2 S.C:R.

A Explanation : For the purposes of this notification, "inputs" does not
include -

(i) to (iv) *** *** ***
THE TABLE
B
S.No. Description of Description of
Inputs final products

I. Goods classifiable under Goods classifiable under
any headings of chapters
c 28,29,30,32,33,34,35,
any headings of chapters
28,29,30,32,33,34,35,
36,37,38,39,40,48, 70, 36,37,38,39,40, 70, 72,
72, 73, 74, 75, 76, 78, 79, 73, 74, 75, 76, 78, 79, 80,
80, 81, 82, 83, 84, 85, 86, 81, 82, 83, 84, 85, 86, 87,
87, 88, 89, 0, 91, 92, 93, 88, 89,90,91,92,93,94,
D 94, 95, or 96 95, or 96

(other than those falling (other than those
under Heading Nos. falling under Heading
36.03 or 37 .05) of the Nos. 36.03 or 37.05) of
Schedule to the Central the Schedule to the
E Excise Tariff Act, 1985 Central Excise Tariff Act,
(5 of 1986) 1985 (5 of 1986)

The Notification, e~tracted above, was amended by Notification No.
F 82/87-CE which is as under :

"Exemption to captive consumption of MODV AT items - In exercise
of the powers conferred by sub-rule (I) of Rule 8 of the Central
Excise Rule, 1944, the Central Government hereby makes the
following further amendment in the Notification of the Government
G of India in the Ministry of Finance (Department of Revenue) No.
217/86-Central Excise, dated the 2nd April, 1986, namely:

In the said notification for the Table, the following Table shall be
subs.tituted, namely :

H
C.C.E. v. HINDUSTAN SANITARYWARE& INDUSTRIES 227
THE TABLE A

S.No. Description of Description of
Inputs final products

'• I, Goods classifiable under Goods classifiable under
any ~eadings of under any headings of
B
chapters....... 25 ...... (other chapters ....... 69 ..... (other
than those falling under than those falling under
Heading Nos. 36.05 or Heading Nos. 36, 05 or
37.06) of the Schedule to 37.06) of the Schedule to
the Central Excise Tariff
Act, 1985 (5 of 1986)
the Central Excise Tariff c
Act, 1985 (5 of 1986)

A perusal of the Notification as amended by Notification No. 82/87,
extracted above, shows that the description of inputs given in column (2)
under Chapter 25, would be 'plaster of paris' and the final product given in
column (3) under Chapter 69 would be 'ceramic goods'. D
The proviso postulates a situation where the final product itself is
exempted iri which case alone the exemption of plaster of paris under
Notification No. 217/86 cannot be availed. It is nobody's case that the
sanitaryware falling under Chapter 69 has been exempted by the Central E
Government. What is exempted is plastic moulds but they are only inputs and
not final product in this case. This fact is further clarified by the Central
Government in Notification No. 221/86, as amended by Notification No. 89/
89. Item 6 thereof clearly mentions that plaster of paris moulds are input for
ceramic products.
F
From the above discussion, it follows that plaster ofparis which is used
as inputs in relation to the manufacture of sanitaryware (final product), is
exempt under Notification No. 217 /86 dated April 2, 1986, as amended.

In this view of the matter, we do not find any illegality in the orders
under challenge. G
The appeals are, therefore, dismissed, but in the circumstances of these,
there shall be no order as to costs.

R.P. Appeals dismissed.
H