Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Eros Pharma (P) Ltd. on 20 April, 1994
Equivalent citations: 1994(73)ELT72(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. This appeal has been filed by the Revenue against the order of the Collector of Central Excise (Appeals), Bangalore. Under the impugned order the learned Collector (Appeals) has allowed the respondents' plea that MODVAT credit relatable to the glass bottles which got broken in the process of packing of the goods in the respondents' factory cannot be asked to be reversed in view of Rule 57D of the Central Excise Rules, 1944. The learned lower appellate authority has also allowed the respondents' plea on limitation.
2. The appellant-Collector has urged the following grounds of appeal:
"(a) The Collector (Appeals) erred in appreciating that :-
(i) The credit availed on inputs i.e. Glass bottles is available provided final product suffers C. Excise duty, as per Rule 57A. As the Glass Bottles broken were cleared before use as inputs in manufacture, credit availed is contravening the provisions of Rule 57C of Central Excise Rules, 1944 and hence not admissible.
(ii) The waste and scrap of Glass Bottles are not by-product in the process of manufacture of final product and hence does not fall within purview of Rule 57A of Central Excise Rules, 1944.
(iii) The CEGAT in its judgment in the case of Collector ofC. Ex., Pune v. Chloride India Ltd. 1988 (34) E.L.T. 288 (Tribunal) in the context of Rule 56A has observed that the waste mentioned in Rule 56A(3)(iv) are those which arise as a by-product in the process of manufacture of final product. Applying this ratio, the inputs which have become useless or have become waste cannot be treated as a waste arising in the process of manufacture of final product. The Glass Bottles which get damaged during packing of medicines, cannot be treated as waste to the purpose of Rule 57D as the wordings in this Section are identical as under Rule 56A.
(b) The S.C.N. issued on 5-12-1990 sought to recover duty on scrap of Glass cleared vide G.P. 1 No. 100, dated 29-5-1990 is not hit by limitation of time under proviso to Section 11A as monthly RT. 12 returns are required to be submitted to the jurisdictional Central Excise Office by 5th of following month. Hence RT. 12 return for May 1990 had been submitted only June '90 while show cause notice issued is within the time limit of six months i.e. on 5-12-1990."
3. The learned original authority demanded recovery/reversal of Mod-vat credit availed on Glass bottles for the reason that glass bottles are not inputs and hence the waste of glass bottles cannot be treated as waste referred in Rule 57F(4)(a) and in the light of the Rule 57C, the modvat credit corresponding to the input (glass bottles) contents, contained in the waste requires recovery. The learned lower appellate authority while setting aside the order of the learned original authority, has held as under :
"The appellants plea that the notice is hit by limitation is correct arid on this point the said appeal is allowed. IIndly on the merits of the case there is no denial of the fact by the Asstt. Collector that the glass bottles are used as inputs in the manufacture of final product P or P medicines. During the process of manufacture certain bottles got broken and these are to be discarded. Credit involved in respect of the inputs which become waste during the course of manufacture need not be denied or varied. Rule 57D of the Central Excise Rules clearly say so. It stated that credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that the part of the inputs is contained in any waste/refuse, or by-product arising during the manufacture of final product, whether or not such waste, refuse or by-product is exempt from the whole of the duty of exise leviable thereon or is chargeable to nil rate of duty is not specified as final product under 57A. In this case the waste arise during the course of manufacture and is removed from the factory. The Assistant Collector's plea that scrap is not dutiable and therefore credit is not available does not have much substance. I accordingly set aside the order of the Assistant Collector and allow the appeal."
4. The learned DR for the Department reiterated the grounds of appeal. He was asked to elucidate as to under which rule the MODVAT credit taken in respect of the bottles which got broken could be disallowed. He, however, adopted the reasoning of the Collector in the grounds of appeal.
5. The respondent has pleaded for decision of the case on merits.
6. We observe the admitted position is the glass bottles have got broken after the credit in respect of the same had been taken and that the same were broken during the process of manufacture of the finished product. We observe that after the glass bottles have been received in the factory under the MODVAT rules the same have to be utilised in terms of Rule 57F. There is no dispute that the glass bottles were taken into use for the purpose of manufacture of finished product and while doing so some of the bottles got broken. Rule 57F(4) specifically provides for as to how the waste has to be dealt with during the course of manufacture. Under this Rule any waste arising from the processing of inputs in respect of which credit has been taken may be removed or destroyed as provided for under the said sub-rule. In the context of the use of glass bottles the word "processing" has to be given a wider meaning. The bottles may themselves may not undergo any change and may only be physically removed for being used as packing materials. The taking into the use of the bottles in the factory for the finished product in the context of the MODVAT Scheme will have to be taken to be covered under this Sub-rule (4) and if these got broken, the broken pieces that may arise will have to be considered as waste as arising during the use of the inputs viz. the glass bottles in or in relation to the manufacture of the specified finished product under Rule 57A and since Sub-rule (4) alone is the only provision relating to the waste, the said rule has to be taken to cover within its ambit such waste of the glass bottles also. Rule 57D also covers similar contingency and this rule for convenience of reference is reproduced below :
"Rule 57D. Credit of duty not to be denied or varied in certain circumstances -(1) Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse, or by-product arising during the manufacture of the final product, whether or not such waste, refuse or by-product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty or is not specified as a final product under Rule 57A.
(2) Credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon (or chargeable to nil rate of duty):
Provided that such intermediate products are used within the factory of production in the manufacture of final product on which the duty of excise is leviable whether in whole or in part."
The respondents' case would be covered also within the ambit of this rule as held by the learned lower appellate authority. In view of the above we hold that the learned lower appellate authority's order is maintainable in law and the appeal of the Revenue is, therefore, dismissed.