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TMI Blog2003 (11) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... been invoked in the show cause notices. The benefit of Modvat credit of the duty already paid cannot be disallowed to the Appellants on the plea that the Modvat procedure was not followed by them. It has been held by the Tribunal in Bharat Wagon Engg. Co. Ltd. v. CCE,[ 2001 (1) TMI 498 - CEGAT, KOLKATA] , following the decision of the Supreme Court in Formica India Division v. CCE,[ 1995 (3) TMI 98 - SUPREME COURT] , that in subsequent demands of duty Modvat credit of duty paid on the inputs is admissible irrespective of non-following of procedure ........ The procedure for availing Modvat credit was not being followed by Appellants because the final product was being cleared without payment of duty in which case credit was not admissible to them. Accordingly we hold that the Appellants are eligible for Modvat credit of the duty paid earlier on the bulk drugs by them subject to the condition that they produce the duty paying documents to the satisfaction of the adjudicating authority. We, therefore, remand both the matters to the adjudicating authority for allowing the Modvat credit on production of the duty paying documents by the Appellants within 8 weeks of receipt of this Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment to render the product marketable to the consumer", is attracted for the following reasons:- (i) The re-processed goods, in some cases, had not been sent to the very same customers whom the defective goods were received from; (ii) Value addition to the re-processed goods; (iii) The goods have become unmarketable when rejected by the customers and as such the activity of removing the defects in the rejected goods would amount to "rendering the product again marketable to the consumer." 4.1 The learned Consultant mentioned that the Commissioner has travelled beyond the show cause notice for there is no allegation at all in regard to the marketability factor in the notice except a re-production of the said Note; that in any case the findings of goods being sent to other persons after removing the defects and value addition are not relevant for invoking Note 11 to Chapter 29; that the Note talks about the treatment to the product and not the commercial aspects. He relied upon the decision in Lakme Lever Ltd. v. CCE, Mumbai, 2001 (127) E.L.T. 790 (Tribunal) wherein it has been held that the process to fall within the meaning of "any other treatment" must be one which confers u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling, blending, testing, repacking, re-labelling and putting a new lot No. and new expiry date and chemical processes like hydrolysis, crystallization, etc.; that this is apparent from the statements of Shri M.S. Negi, Senior Manager and Shri V.S. Maman, Senior Manager, that thus the products were subjected to treatment to render it marketable to the consumer; that the product was not marketable as it was received back from the customer as rejected material. He, further, submitted that sub-rule (4) of Rule 173H of the Central Excise Rules, 1944 clearly provides that the benefit of duty free clearance would not be available if the process amounts to manufacture. He also mentioned that benefit of Modvat credit will also be not available as they had not followed any procedure for availing the same; that penalty is also imposable on them as they had misdeclared that the goods were received back only for testing and they had suppressed the fact of giving treatment to the rejected goods to make them marketable. In reply the learned Consultant mentioned that at the time of filing D-3 declaration, they cannot envisage the nature of processing required to rectify the defect; that this can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, milling, blending, testing by Quality Assurance, repacking, re-labelling and putting a new lot number and new expiry date; that product may be processed chemically also which means hydrolysis, crystallization. It has also been stated by Shri Negi that the product is considered as a fresh material as if manufactured and allotted fresh lot number. Bulk Drugs, manufactured by the Appellants fall under Chapter 29 of the Schedule to the Central Excise Tariff Act. Note 11 to this Chapter reads as under: "In relation to products of this Chapter, labelling or re-labelling of containers and repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture." 8.We find substantial force in the submission of the learned SDR that the processes as undertaken by the Appellants are covered by the phrase "the adoption of any other treatment to render the product marketable to the consumer." After the product was initially cleared, their customers found it to be defective, meaning thereby that the product in question was not marketable and for this reason the product has been returned by their customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. However, the benefit of Modvat credit of the duty already paid cannot be disallowed to the Appellants on the plea that the Modvat procedure was not followed by them. It has been held by the Tribunal in Bharat Wagon Engg. Co. Ltd. v. CCE, Patna, 2001 (131) E.L.T. 681 (Tribunal), following the decision of the Supreme Court in Formica India Division v. CCE, 1995 (77) E.L.T. 511 (S.C.), that "in subsequent demands of duty Modvat credit of duty paid on the inputs is admissible irrespective of non-following of procedure ........ The procedure for availing Modvat credit was not being followed by Appellants because the final product was being cleared without payment of duty in which case credit was not admissible to them." Accordingly we hold that the Appellants are eligible for Modvat credit of the duty paid earlier on the bulk drugs by them subject to the condition that they produce the duty paying documents to the satisfaction of the adjudicating authority. 10.We, therefore, remand both the matters to the adjudicating authority for allowing the Modvat credit on production of the duty paying documents by the Appellants within 8 weeks of receipt of this Order. In view of this we set as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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