ORDER
P. Karthikeyan, Member (T)
1. These are two appeals directed against the Order-in-Original passed by the Commissioner of Central Excise, Pondicherry. In the impugned order, the adjudicating authority has demanded an amount of duty of Rs. 21,39,510/- from M/s Supreme Industries Ltd. interest thereon w.e.f. 28.9.96 and imposed a penalty of Rs. 5 lakhs on them under Rule 173Q. The facts of the case are that M/s. Supreme Industries Ltd., Sedarapet, Pondicherry manufactured plastic moulded furniture, parts and accessories of motor vehicles falling under Chapter Heading 9401/9403 & 8714 respectively. The allegation was that during July 1994 to November 1996, they had cleared, without payment of duty, plastic moulded furniture in terms of Rule 173H even though the returned goods had been subjected to processes amounting to manufacture such as remelting. During adjudication, the appellants had submitted that they had filed D-3 intimations and recorded the rejected goods in various registers and that the SCN had acknowledged that the quantity of remanufactured goods cleared by them without payment of duty was equal to the quantity of rejected goods received from their customers. They relied on the ratio of the Tribunal’s decision in CC Meerut v. JG Glass Ltd. wherein it was held that Rule 173H was ambiguous as it allowed in Sub-rule (1) retention or receipt of duty-paid goods which needed to be remade and yet allowed in Sub-rule (2) clearance of such goods without payment of duty if not subjected to any process amounting to manufacture. It was well settled that when there was any ambiguity in statutory provisions, the benefit should be extended to the subject. They had also cited the case of CCE Pune v. Sterlite Industries (I) Ltd. 1998 (29) ELT 517 (CEGAT) wherein it was decided that when copper rods of certain specifications had been returned by the customers due to defects, by the very nature of the goods and defects thereon, the remedy was only in remelting and remaking as these rods were remade to the same specifications. In that case the CEGAT had relied on instructions issued under various Trade Notices like Trade Notice No. 38/92 dated 4/9/92 and that as per judgments of the Apex Court instructions issued by the Department were binding on authorities under the CBEC. They had also submitted that the demand was time-barred as the goods received for reprocessing were entered in Form-V register and D-3 intimations had been sent. Therefore, there was no suppression of facts. The SCN had been issued 15 months after they gave the information.
2. The Commissioner observed that the customers had sent the rejected goods for replacement and, therefore, the contention of the assessee that the rejected goods had been received for repair or reprocessing was not legally tenable. In view of these facts, the ratio of M/s. JG Glass Industries Ltd. (supra) was not relevant. The Commissioner decided that in view of the suppression of facts, the demand was not timebarred and decided the issue demanding duty, interest and imposing penalty.
3. In the appeal filed by the assessee, they have argued that they were not given several documents in time to enable them to reply to SCN. The documents sought were furnished on 15.7.99 and the impugned order was passed on 16.7.99. It was submitted that the order was passed by the Commissioner considering the allegations not made in the SCN. The SCN had alleged that the appellants had wilfully misdeclared the remanufactured goods as reprocessed goods in their Form-V register and also their sale invoices whereas in the impugned order, it was held that the rejected goods had been received by the appellants as for replacement and the appellants had supplied fresh goods in lieu of remanufactured goods. They relied on the Kanayalal Bhagnani, Calcutta v. CCE , wherein it was held that when the charge set out in the SCN was diametrically opposed to the charge established, the adjudication order was void. It was submitted that the allegation made in the SCN was that the damaged goods received by the appellants were remanufactured and cleared without payment of duty as reprocessed goods in their Form-5 register and also the sale invoices. The SCN had alleged that remanufactured goods were not covered by Rule 173H. However, in the impugned order, the Commissioner took a different stand. It was also submitted that the Commissioner had demanded interest and imposed penalty even though the appellants were not liable to pay duty or interest. They requested to vacate the impugned order.
4. In the appeal filed by the department, the Revenue sought to apply the provisions of Section 11AC and 11AB retrospectively as the Commissioner had passed the impugned order following the stand that Section 11AC and 11AB were operative only w.e.f. 28.9.96.
5. We have carefully considered the case records and the submissions made by both sides. The issue decided by the Commissioner in the impugned order is the liability to duty of goods received for repairs but remanufactured and cleared without payment of duty in terms of Rule 173H. There is no dispute that the assessee had filed D-3 intimations in time and also maintained records and indicated details of clearance of such goods in their returns. Therefore, the issue to be decided is whether Rule 173H allows duty-free clearance of remanufactured goods received for repairs.
6. In the proceedings before the adjudicating authority as well as in the appeal before us, the appellants have relied on the ratio of CC Meerut v. JG Glass Ltd. in support of their claim that Rule 173H allowed duty-free clearance of remanufactured goods received for repairs. They cited the following extract from the above order:
It is true that the process adopted by the respondent company for making the glass vials is nothing but a process of manufacture but at the same time there is no other way of removing the defect in the duty-paid rejected glass vials and if the permission is not granted in this case, the rules itself become in applicable to the commodity of glass vials which would not be the intention of the rule-making authority. It is observed that there is an ambiguity in Rule 173H itself insofar as it allows in Sub-rule (1) retention or receipt of duty paid goods which “need to be re-made” and yet in Sub-rule (2), it allows clearance of such goods from the factory or warehouse without payment of duty, if not subjected to any process of manufacture. The term “remaking” necessarily means that the manufacture of the same product from the duty paid goods. Ambiguity, therefore, lies in the fact that what has been permitted to Sub-rule (1) of Rule 173H has been disallowed by Sub-rule (2) thereof. Yet the rule is general in character and does not limit itself to any specific commodity. It is well settled that if there is any ambiguity in any statutory provisions the benefit thereof should be extended to the subject.
They also cited the decision of the Tribunal in the case of Sterlite Industries (I) Ltd. v. CCE Pune in support of their claim. We find that the facts of the subject case are similar to the facts of the case decided in JG Glass Ltd. and Sterlite Industries (I) Ltd. (supra). In view of ratio of the Tribunal’s decision in CC Meerut v. JG Glass Ltd. we find that the impugned order is not sustainable. Accordingly, we set aside the impugned order and allow the appeal of M/s. Supreme Industries Ltd. In the result, the appeal filed by the Revenue seeking to demand interest on duty demanded for a longer period and to impose a higher penalty also gets dismissed.
(Operative part of the order was pronounced in open court on 22.9.2006)