ORDER
R. Jayaraman, Member (T)
1. This is an appeal from the Revenue against the order in Appeal No. PCJ11l/B-III/93, dated 22-1-1993, allowing the appeal of the respondents by setting aside the order in original No. VCH 32(18-45)90/3183, dated 30-6-1992 rejecting 10 refund claims of the respondents. The prayer in the appeal from the Revenue is to restore the order in original passed by the Asstt. Collector.
2. Facts in common relating to all the 10 refund claims can be stated as below :
2.1 The respondents filed 10 refund claims under the provisions of Rule 173L of the Central Excise Rules in respect of the duty paid on goods returned by the customers, which were received in their factory, after verification on the basis of D-3 declarations filed.
2.2 There is no dispute that the returned goods were taken into form V account and they were stated to be removed with remarks ‘blending’. All the same, the materials, obtained after blending are indicated as having been cleared on payment of duty again.
2.3 Show cause notices were issued on the following grounds :
(i) Show cause notice for Rs. 9,519.20/-. Description of rejected goods is Permanent Red 2G with code No. 4203152, while the description of goods cleared after reprocessing is colour chem red fine paste – 535 with code 4101150. The quantity of rejected goods is 300 kgs, while the quantity of reprocessed goods cleared is 735 kgs.
(ii) Show cause notice for Rs. 6078/-. The quantity of rejected goods received is 150 kgs and the quantity of reprocessed goods is 720 kgs.
(iii) Show cause notice for Rs. 31,646/-. The quantity of rejected goods received is 780 kgs; the quantity of reprocessed goods cleared is 1000 kgs;
(iv) Show cause notice for Rs. 11,088/-. The description of the rejected goods is Varna fine Red 2B paste with code No. 4102172, but the description of reprocessed goods cleared on payment of duty is colour chem red fine paste – 548′ with code No. 4101170. The quantity of rejected goods received is 300 kgs, while the quantity of reprocessed goods cleared is 1268 kgs;
(v) Show cause notice for Rs. 36,115/-. The description of rejected goods is Verna Fine Green G Paste – quantity 1500 kgs – The description of reprocessed goods cleared on payment of duty is ‘Imperon Green KC-G’ and quantity reprocessed and cleared is 2888 kgs.
(vi) Show cause notice for Rs. 12,038/-. Description of rejected goods -Verna Fine Green G. Paste’ of a quantity of 500 kgs – But the description of reprocessed goods is Imperon Green KC-G’ Quantity cleared 2075 kgs.
(vii) Show cause notice for Rs. 11,719.58/-. Description of rejected goods is Permanent Bordeaux F2R of quantity 150 kgs- But the description of reprocessed goods is Imperon Bordeaux -KC-R of a quantity of 2600 kgs;
(viii) Show cause notice for Rs. 9,261.00/-. Description of rejected goods is colour chem red fine paste – 551 but the description of reprocessed goods in Imperon Red KC-GR.
(ix) Show cause notice for Rs. 29,371/-. Description of rejected goods is Lake Scarlet CTL but the description of reprocessed goods is ‘Lake Scarlet CT with a different code number.
(x) Show cause notice for Rs. 12,390/-. Description of rejected goods is ‘Verna Fine Yellow G. Paste’ of a quantity of 500 kgs – but the description of reprocessed goods cleared is colour chem yellow fine paste 517 of a quantity of 5600 kgs.
[emphasis made to show that both rejected & reprocessed goods are of the same colour (class)]
2.4 The Asstt. Collector rejected the refund claims holding that the respondents, though have received the duty paid rejected goods and have done the blending as per the form V register, what is blending could not be explained by them. The quantity, description and code numbers of reprocessed goods are different from the once relating to rejected goods received for reprocessing. The respondents have not maintained the accounts by filing up column 7, 8, 9, & 10 of form V register. They have simply accounted for the rejected goods received and the details of goods cleared. The details of the processes carried out are not reflected in the register, The quantity and description of reprocessed goods are at wide variance with those of returned goods and hence it cannot be believed that the goods have been reprocessed. It appears that the respondents have simply received the rejected goods and have mixed it up with other goods and have cleared goods of other description on payment of duty. Such blending of rejected goods with other goods does not appear to be covered by Rule 173L. In this view, he rejected the refund claims.
2.5 However, on appeal by the respondents, the Collector (Appeals) set aside the above order of the Asstt. Collector and allowed their appeals, on the following grounds :
(i) The goods are pigments and preparations thereof. They are manufactured to certain specifications and standards to the requirements of the customers. So when a consignment is rejected on account of its quality or specification, these goods are invariably reprocessed, which may result into a different quality but falling under the same class. Different description and different code numbers are not indication of resulting goods being of a different class under Rule 173L, there is no bar for rejected goods being reprocessed into goods of different description so long as resulting goods fall in the same class of the rejected goods.
(ii) Blending is an operation, which is carried on for making of pigments and preparations thereof. Several ingredients are mixed to get the desired specifications and standards. It is therefore a process resulting in a finished product. Hence, it is not correct on the part of the Asstt. Collector to hold that blending is not covered by Rule 173L;
(iii) When blending involves mixing with other ingredients, the quantity reprocessed is bound to be more as compared to the quantity of rejected goods blended with other ingredients;
(iv) The appellants have clearly given the details of other ingredients added in their worksheets submitted with refund claims. Hence, it cannot be held that the goods may not have been processed at all on the basis of variations in reprocessed quantity as compared to quantity of rejected goods.
(v) The appellants have given detailed worksheet alongwith refund claims to show the duty paid on reprocessed goods and there is no reason why the worksheet cannot be accepted. The reprocessed quantity containing the rejected goods has been cleared on payment of duty. There is no allegation in the show cause notice that the rejected goods were not reprocessed.
In view of the above detailed findings, the Collector (Appeals) allowed the appeal.
2.6 The present appeal is from the Revenue against the above order of the Collector (Appeals).
3. Shri Ravinder Jain, the Ld. JDR, refers to the grounds of appeal and the order of the Asstt. Collector to urge the following contentions :-
3.1 Form V account is incomplete with regard to entries relating to nature of reprocessing, other ingredients added and the resultant product obtained. Hence, proper accountal has not been rendered as required under Rule 173L. This is not a mere procedural requirement but a substantive requirement under the law for establishing proper correlation of the reprocessed goods with the rejected goods put in the reprocess.
3.2 What is obtained by blending could not be explained. The nature of blending is not disclosed to the Department.
3.3 The Respondent could not explain as to why the quantity cleared after reprocessing was more than twice or thrice receipted goods.
3.4 In view of the above, proper correlation and accountal of rejected goods subject to reprocessing and cleared on payment of duty again has not been established to the satisfaction of the Asstt. Collector. Hence, the Asstt. Collector could not have arrived at the satisfaction for allowing the refunds.
4.1 Shri Prakash Shah, the Ld. Advocate filed, a paper book containing the copies of relevant form V register, D-3 declaration filed to show that they have complied substantially with the statutory requirement under Rule 173L.
4.2 In the official text of the form prescribed for form V register, there is no column for showing the details of reprocessing (Col 7). Hence, they have indicated ‘blending’ in a general manner.
4.3 He also referred to the detailed worksheet given to the Asstt. Collector after personal hearing (vide their letter dated 6-7-1992), wherein all the details of processing done, quantity of other ingredients vised, quantity obtained after reprocessing. The Asstt. Collector has not considered the worksheet at all, while the Collector (Appeals) has taken into account the explanation as per the worksheet for arriving at the satisfaction.
4.4 The Collector (Appeals) has considered every one of the objection raised in the show cause notice and the finding of the Asstt. Collector. The factual position discussed in the findings of the Collector is not disputed. Hence, even if it is considered that the details as given in the worksheet later along with their submissions during personal hearing, ought to have been recorded in from V register, that cannot be held to be a substantive factor for rejecting their refund claim,
5.1 After hearing the arguments from both the sides and perusing the documents placed before us, we are to identify the following undisputed factual positions :
(i) Goods cleared on payment of duty were rejected by the Customers and returned to the factory of the respondents. They were duly verified by the officers of Central Excise Department and taken into form V account.
(ii) Entries in form V record show that they were blended and goods obtained in reprocessing were cleared on payment of duty.
(iii) Quantity and description of goods obtained after reprocessing were not the same as the ones of rejected goods. All the same, there are no evidences to show that they were dumped elsewhere and not subjected to blending with other materials.
(iv) The details of the nature of reprocessing alongwith other ingredients used were furnished before the Asstt. Collector after personal hearing and this was not taken into consideration by him but considered by Collector (Appeals)
5.2 In the context of the aforesaid factual position which emerges on hearing both the sides, we are to look into for considering whether the respondents have complied substantively with the requirements of Ride 173L. Rule 173L envisages sanction of refund of duty paid on rejected goods returned to the factory for being remade, refined, reconditioned or subjected to any other similar process in the factory, subject to certain conditions. From the above, even ‘blending’ is a process similar to the ones specified for obtaining the reprocessed goods. Hence, no objection can be taken, if the record shows ‘blending’ in the column for reprocessing. Now, let us consider the conditions :-
The substantive conditions are that the duty paid goods are to be returned to the factory; re-entry is duly established; the assessee maintains a detailed account of the returned goods and the processes to which they are subjected after they are returned; reprocess duly completed and accounts rendered within six months of return of the goods; no refund is admissible in respect of opened package containing goods with concessional rates of duty or partial exemption for small scale/cottage Sector or where the amount of refund claimed is less than Rs. fifty; refund is not admissible where the returned goods are disposed of in any other manner other than for production of goods of the same class.
5.3 We find in this case that allegation is mainly based on the discrepancy in regard to description and quantity of the returned goods vis-a-vis reprocessed goods cleared. There is no allegation that reprocessed goods fall under a different class of the goods vis-a-vis rejected goods. In view of this, the discrepancy alleged can not affect the eligibility for refund so long as it is not disputed that the rejected goods after reprocessing by blending with other ingredients result in production of the goods of the same class. This is what the Collector (Appeals) has observed, with which we entirely agree.
5.4 Now coming to the apprehension, that because of these descrepan-cies and the absence of details regarding reprocessing and quantity and details of other ingredients used not being mentioned in form V register, there could not have been any reprocessing at all, we are to observe that there is no basic allegation to that effect that the rejected goods receipted in form V register have been put to some other use other than for reprocessing and there are no evidences adduced to that effect even at this stage. The admitted position is that the records show that rejected goods are removed for blending, but it is observed by the Asstt. Collector that the respondents could not explain during personal hearing as to what is meant by blending. All the same, soon after personal hearing was over, details of all the ingredients used in blending and the nature of reprocessing have been given to the Asstt. Collector, which he appears to have over looked. When this is looked into, there cannot be any doubt that the rejected goods were put in the process by blending with other ingredients to obtain the higher quantum of resultant products. This has been rightly taken into account by the Collector (Appeals) We are to observe that different columns in the register are meant for broadly indicating that the rejected goods received are accounted for and put in reprocess. Any omission in recording certain details can not be fatal for the claim, if they could establish the nature of process and ingredients used in the process subsequently. Hence, we are of the view that the Asstt. Collector cannot fail to ignore the worksheet, without effectively rebutting it by adducing evidence to the contrary. Hence, we agree in toto with the findings of the Collector (Appeals) on the score. Even at this stage, the Department have not come out with any evidence to show that details given in their worksheet are not true and cannot be accepted.
5.5 Going by these accepted factual details, we find no reason to differ from the detailed and reasoned findings of the Collector (Appeals) and confirm each one of them.
5.6 In the result, we dismiss the appeal from the Revenue and direct the Department to extend the consequential relief arising out of the order-in-ap-peal passed by the Collector (Appeals).