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Issues:
Whether finished products returned by the respondent's customer due to defects can be treated as inputs for duty credit under Rule 57A of the Central Excise Act, 1944. Analysis: The appellate authority considered the question of whether defective finished products returned by the respondent's customer can be treated as inputs for duty credit under Rule 57A. The authority referred to the Larger Bench decisions in the cases of Tin Manufacturing Company and Hindalco Industries Ltd. The authority granted benefit to the respondents based on the declaration made under Rule 57G by the respondents and duly received by the revenue. The revenue contended that the final product cannot be converted to regenerate granules as the respondents lack the facility to do so. However, the authority noted that there was no evidence that the defective bags were cleared on payment of duty after removing defects. The authority emphasized that it is not necessary for the bags to be converted into granules first before manufacturing new bags. The authority found no justification to deviate from the Larger Bench's decision and rejected the revenue's appeal. This judgment highlights the importance of following the provisions of Rule 57G and the possibility of treating defective products as inputs for duty credit under Rule 57A. It clarifies that the absence of a facility to convert defective products into granules does not preclude the clearance of such products on payment of duty. The judgment underscores the need for revenue to provide evidence if alleging non-compliance with duty payment requirements. The decision reaffirms the principle that defective products can be rectified and cleared on payment of duty without the need for specific regeneration processes.
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