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2022 (11) TMI 924 - AT - Central ExciseLevy of Excise duty - Polycarbonate Containers - Goods returned for repairs due to quality issues - goods were cleared after repairs - Rule 173H of CER - whether the goods were exempt from payment of duty under Sr. No.57 of Notification No.4/97-CE dated 1-3-1997? - Clandestine removal or not - HELD THAT - As is evident from the record, up to February 1999 AIL was clearing the Polycarbonate Bottles under the belief that the same were exempt from duty and duly reflecting such duty-free clearances in the RT-12 Returns. There could therefore be no motive or reason for AIL to wrongly declare freshly manufactured Bottles as repaired Bottles under Rule 173H. Upon perusal of records, it is clear that on receipt back of the Bottles earlier cleared, the AIL had duly filed with the Excise department, intimation of receipt of the goods in Form Annexure A; the said Forms Annexure A were duly received by the department as is evident from Received Stamp/ signature of the Inspector on the said Forms Annexure A and that the fact that such Forms in Annexure A were duly filed with the department; that after receipt of the duty paid goods in the factory for repairs and after giving intimation thereof to the department, particulars of the same were duly recorded in Form V Register - The said statutory records/ documents viz. Forms Annexure A bearing Received Stamp/ signature of the Inspector, Form V Register, Forms Annexure C bearing receipt stamp/ signature of the Inspector and Invoices clearly establish the receipt of the goods cleared earlier, for the purpose of repairs, and the removal after carrying out of repairs. That the show cause notice has not disputed the genuineness of the aforesaid documents/ records; no statement has been recorded of the central excise officers who had acknowledged the said intimations and thus in the face of the said statutory documents/ records, the case of the department that no goods were received under Rule 173H for repairs and that what was cleared as repaired goods were in fact freshly manufactured goods cannot be sustained. That the Commissioner s finding that rejection of Bottles was without any reasonable ground or that the nature of the defects were such as required remaking of the Bottles cannot be appreciated without there being any evidence in support thereof. Clandestine removal or not - HELD THAT - The department has not produced any evidence to show procurement of excess quantity of raw materials required to manufacture the quantity of Bottles which the department alleges was not return of repaired goods but freshly manufactured goods. It is settled law that in the absence of evidence of purchase of raw materials to manufacture the quantity of finished goods alleged to be clandestinely cleared, no case for clandestine removal can be said to have been made out. Eligibility to exemption under serial No.69 of Notification No.5/98-CE dated 2-6-1998 - HELD THAT - Serial No.69 of Notification No.5/98-CE dated 2-6-1998 grants exemption to All goods of headings 39.23, 39.24 and 39.26 except goods of Polyurathanes, insulated ware and certain bags and sacks and fabrics. The goods in the present case are Polycarbonate Bottles of heading 39.23 and they are not hit by the said three exceptions. The said exemption is subject to condition No.10 which is duly fulfilled in the present case. The said condition 10 requires that credit of duty paid on the products mentioned in column 2 of the Notification or on any other product manufactured in the same factory should not have been availed. That there is no dispute to the fact that Appellant-AIL have not availed credit of the duty paid on the Bottles or of the duty paid on any other product manufactured in their factory. The Commissioner erred in proceeding on the basis that since AIL had availed Modvat Credit of the duty paid on the inputs used in the manufacture of another product viz. Weighing Scale manufactured in the same factory, Condition No.10 was not satisfied - the goods were otherwise also entitled to exemption from duty under serial no. 69 of the said notification no. 5/98-CE dated 2-6-1998. The demand for duty of Rs.49,039/- is confirmed on 490 Bottles received under Rule 173H on the ground that the same were cleared after a period of six months from the date of receipt of the rejected goods under Rule 173H is also untenable. That there is no such stipulation of 6 months in Rule 173H. It is not open to the department to read into the statutory provision of Rule 173H, a limitation period which is not prescribed in the Rule. The Commissioner erred in relying on a trade notice which stipulated the said limitation period of 6 months. When no limitation period was stipulated in Rule 173H, no such limitation period can be introduced in the statutory Rule 173H by means of a Trade Notice which has no statutory force. Even otherwise since in view of above there was no manufacture of fresh goods there cannot be a duty demand merely for reason of clearance after 6 months. Since no duty was payable on the said goods and since the said goods are not liable to confiscation, the imposition of fine and penalties on appellants are liable to be set aside - confiscation of land, building, plant and machinery and in imposition of redemption fine, since the duty demand itself is unsustainable in law, the said order of confiscation and fine is liable to be set aside. Appeal allowed.
Issues Involved:
1. Whether "Polycarbonate Containers" were received back by the appellant under Rule 173H of the Central Excise Rules, 1944, and repaired and cleared accordingly, or if they were freshly manufactured containers cleared in the guise of repaired containers. 2. The validity of the demand for duty and penalties imposed by the Commissioner of Central Excise, Surat-II. Issue-wise Detailed Analysis: 1. Receipt and Clearance of Polycarbonate Containers: The main contention was whether the Polycarbonate Containers received back by the appellant, Atco Industries Ltd (AIL), were genuinely repaired and cleared under Rule 173H or if they were freshly manufactured and cleared without payment of duty. The appellant argued that they followed the complete procedure under Rule 173H, including filing intimations in Form Annexure A and Form V Register, and giving cross-references in invoices. The Commissioner, however, alleged that the intimations were fictitious, relying on the statement of the security supervisor and the inward-outward register, which was deemed unreliable by the Tribunal in previous litigation. The Tribunal found the statutory documents maintained by AIL to be genuine and held that the department's case of freshly manufactured goods being cleared under the guise of repaired goods could not be sustained. 2. Demand for Duty and Penalties: The Commissioner confirmed a demand for duty of Rs. 1,10,67,942/- on 90,613 bottles and Rs. 49,039/- on 490 bottles, along with imposing penalties and ordering confiscation of goods and property. The Tribunal found several flaws in the Commissioner's findings: - The reliance on the security supervisor's statement and registers was misplaced as the Tribunal had previously deemed them unreliable, and no cross-examination was allowed. - The Commissioner's conclusion based on the RTO verification and the absence of lorry receipts or proof of freight payment was not tenable. - The Tribunal noted that the department did not provide evidence of excess raw material procurement, which is crucial for proving clandestine manufacture and clearance. The Tribunal also addressed the issue of eligibility for exemption under Notification No. 5/98-CE, finding that AIL had not availed credit of duty paid on the bottles or any other product manufactured in the factory, thus fulfilling the exemption conditions. The Tribunal dismissed the Commissioner's interpretation of Condition No. 10 of the notification. Confiscation and Penalties: The Tribunal found no basis for the confiscation of 23,887 bottles, as they were within the factory and not cleared or attempted to be cleared. The confiscation of land, building, plant, and machinery, along with the imposition of fines and penalties, was also set aside due to the unsustainability of the duty demand. Conclusion: The Tribunal set aside the impugned order, allowing the appeals with consequential relief in accordance with the law, concluding that the entire case built by the department was improbable and not supported by reliable evidence.
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