2003 (9) TMI 432 - AT - Central Excise

Summary

Issues:
- Challenge to orders passed by the Commissioner (Appeals) regarding duty payable on returned goods for rectification.
- Interpretation of Notification No. 9/2001-C.E. for concessional rate of duty.
- Whether goods cleared after repair are exigible to duty for computing the value of clearances.
- Application of circulars and tribunal decisions in determining duty liability on returned goods.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a challenge by the Revenue against the orders passed by the Commissioner (Appeals) regarding the duty payable on goods returned for rectification. The Commissioner (Appeals) had set aside the Order-in-Original, which held that no duty was payable when goods returned for minor rectification were sent back to the buyer after such rectification. The main issue revolved around the interpretation of Notification No. 9/2001-C.E., dated 1-4-2001, which granted a concessional rate of duty of 9.6% on clearances up to Rs. 1 crore.

The Respondents were entitled to the concessional rate of duty as per the notification. However, the adjudicating authority had imposed duty demand on alleged excess clearance of goods returned for rectification, along with a penalty and interest. The assessee contended that goods cleared after repair should not be subject to duty for calculating the value of clearances up to Rs. 1 crore. They relied on a circular clarifying that if the repair process does not amount to manufacturing, the manufacturer should pay an amount equal to the Cenvat credit taken when the goods are removed from the factory again.

The Commissioner (Appeals) agreed with the assessee, stating that the returned goods for minor rectification did not undergo a manufacturing process, and thus no duty was payable again when sent back to the buyer. Reference was made to circulars and tribunal decisions supporting this view. The Tribunal, in its decision, upheld the Commissioner (Appeals) finding that the activity undertaken by the assessee did not amount to a manufacturing process. They also emphasized the proper application of the Board's circular and cited a previous decision where the value of returned goods was not considered for small-scale exemption purposes.

In conclusion, the Tribunal affirmed the Commissioner (Appeals)'s finding and dismissed the appeal by the Revenue, stating that the value of returned goods should not be factored into the computation of duty liability for concessional rates and that no duty was payable on goods returned for minor rectification.