1993 (2) TMI 213 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 56A(3) sub-clause (iv)(c) and sub-clause (iii)
- Application of Rule 56A to the destruction of damaged capsules
- Discrepancy between the orders of the Assistant Collector and the Collector (Appeals)

Analysis:
The case involves an appeal against an Order-in-Appeal regarding the destruction of damaged medicinal capsules. The appellants brought duty paid capsules for testing and re-packing under Rule 56A but faced a show cause notice alleging duty payment for damaged capsules. The Assistant Collector dropped the charge, stating the waste arose in the manufacturing process and duty could be remitted. The Revenue appealed, arguing the capsules were not waste and should be cleared on duty payment. The Collector (Appeals) accepted the appeal, leading to the Tribunal appeal.

Upon analysis, the main issue was whether Rule 56A(3) sub-clause (iv)(c) or sub-clause (iii) applied. The Tribunal considered the factual position, noting permission was granted for bringing duty paid capsules for testing and re-packing, a manufacturing activity. The Tribunal clarified that sub-clause (iii) applies when materials are cleared as such, attracting duty payment. In contrast, sub-clause (iv)(c) deals with waste arising during manufacture, allowing removal on duty payment or destruction with duty remittance if unfit for use.

The Tribunal disagreed with the Collector (Appeals) who applied sub-clause (iii) instead of (iv)(c). It emphasized that as the damaged capsules were found during testing and re-packing, sub-clause (iv)(c) was applicable. The previous order by the Collector (Appeals) supported this interpretation, granting duty remittance for destroyed capsules. The Tribunal highlighted that the department did not prove the capsules were intended for immediate destruction, making sub-clause (iii) inapplicable.

In conclusion, the Tribunal allowed the appeal, recognizing the application of sub-clause (iv)(c) to the case. It upheld duty remittance for the destroyed capsules, in line with Rule 56A provisions. The decision clarified the distinction between sub-clauses and emphasized the specific circumstances under which duty remittance is warranted for damaged materials during manufacturing processes.