2009 (3) TMI 318 - AT - Central Excise

Breakage - In the instant case, the appellants had not paid duty on the breakage of PET bottles of aerated water (final product) which is below 0.5%, permissible as per Board s Circular No. 261/1D/75-CX. 8, dated 17-9-1975. There was a demand of duty and penalty along with interest, which is upheld by the Commissioner (Appeals). Finding of the Commissioner (Appeals) is that the Circular was issued long back in 1975. Further, the Circular relates to breakage of glass bottles whereas in the present case, it is PET (Plastic) bottle. - on identical issue, the Tribunal in the case of Pepsico India Holdings Pvt. Ltd. v. CCE held in favour of the assessee, - Held that breakage of PET bottles of aerated water which is below 0.5%, is permissible as per Board s Circular. Appeal allowed

Summary

Issues:
1. Duty on breakage of PET bottles below 0.5%.
2. Applicability of Board's Circular dated 17-9-1975.
3. Evidence of informing department about availing circular benefit.
4. Interpretation of Circular mentioning "bottles."
5. Comparison with previous Tribunal judgments.
6. Quantity of breakage mentioned in ER-1 return.
7. Benefit of doubt due to reasonable breakage percentage.

Analysis:
1. The appellants were charged duty on breakage of PET bottles below 0.5%, as per Board's Circular No. 261/1D/75-CX. The Commissioner (Appeals) upheld the demand, noting the Circular was issued in 1975 for glass bottles, not PET bottles. Lack of evidence of informing the department about circular benefit was highlighted.

2. The show cause notice was based on ER-1 return. The appellants argued the Circular did not specify glass bottles, only "bottles." They referenced a Tribunal judgment favoring the assessee in a similar case, emphasizing the interpretation of the term "bottles."

3. The breakage of PET bottles was found to be below 0.5%, as per the Circular, and was reported in the ER-1 return. The Tribunal, in a previous case involving Pepsico India Holdings, granted the benefit of doubt due to reasonable breakage percentage and regular communication with the Excise Department.

4. The Tribunal noted the doubts raised regarding the veracity of breakage claims due to the use of plastic bottles instead of glass. However, considering the reasonable breakage percentage and the appellants' monthly communication with the Excise Department, the benefit of doubt was extended, leading to the setting aside of the impugned order and allowing the appeal with consequential relief.

5. Following the decision in the Pepsico India Holdings case, the Tribunal set aside the impugned order, emphasizing the importance of regular communication with the Excise Department and reasonable breakage percentages in granting the benefit of doubt to the appellants. The appeal was allowed with consequential relief.