2007 (7) TMI 459 - AT - Central Excise

Summary

Issues:
Manufacture of Sodium Carboxy Methyl Cellulose (SCMC) of different grades under Chapter Sub-Heading No. 3912.31 of CETA, 1985. Application of Rule 173H of Central Excise Rules, 1944 for blending rejected SCMC AKAYLOSE TM Grade with another grade of SCMC AKAYLOSE SD Grade. Dispute regarding remanufacture and duty payment on 9000 kgs of SCMC AKAYLOSE TM Grade used in the remaking process.

Analysis:
The appeal challenged the order-in-appeal regarding the manufacture and blending of SCMC grades under Chapter Sub-Heading No. 3912.31 of CETA, 1985. The appellants initially cleared 9000 kgs of SCMC AKAYLOSE TM Grade to purchasers, which was rejected for not meeting standards. They then blended this rejected SCMC with SCMC AKAYLOSE SD Grade, subsequently clearing 27000 kgs of SCMC AKAYLOSE SD Grade but paying duty only on 18000 kgs. The dispute arose when authorities questioned the applicability of Rule 173H for the blending process, leading to a demand for duty payment and imposition of penalties.

The Ld. Advocate for the appellants argued that Rule 173H applied as they manufactured SCMC of different grades, citing relevant tribunal decisions. Conversely, the Ld. SDR contended that the blending constituted remanufacture, justifying the duty demand upheld by the Ld. Commissioner (Appeals).

Upon thorough review of submissions and records, it was established that the appellants received back the rejected SCMC AKAYLOSE TM Grade, declared it under Rule 173H, and blended it with SCMC AKAYLOSE SD Grade, maintaining proper records. The resultant product was still SCMC, albeit of a different grade, indicating no new product manufacture. The Tribunal's past decisions in similar cases emphasized that Rule 173H applied even if the process involved re-manufacture, as long as it did not result in a new product from basic ingredients.

In light of the factual matrix and precedent, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment highlighted the applicability of Rule 173H for blending rejected SCMC grades, clarifying that remanufacture within the same product category did not necessitate duty payment beyond the permissible scope of the rule.

This comprehensive analysis of the judgment from the Appellate Tribunal CESTAT, Mumbai underscores the legal intricacies surrounding the application of Rule 173H in the context of manufacturing and blending SCMC grades, providing clarity on remanufacture and duty implications in such scenarios.