ORDER
Shiben K. Dhar, Member (T)
1. The Appellants are engaged in manufacturing Asbestos cement products. Modvat credit on the inputs contained on defective sheets has been denied to the appellants.
2. Arguing on behalf of the Appellants the ld. Counsel submitted that Asbestos Fibre sheets during the process of manufacture are kept in humid condition under water spray for about 28 days for maturity. When these are matured they are shifted and staked in open space exposed to natural phenomena when some expansion and contraction taken place. After this, products are cut and trimmed and the damaged /defective and cracked sheets are salvaged in the next size. During the manufacture of cement products certain pieces of the product develop cracks and defects at various stages of manufacturing. These are not marketable. Subsequently they seek permission from the Commissioner for destruction of such waste products. Under Rule 57D such credit is not be revised. Moreover Tribunal in case of India Gypsum Ltd. v C.C.E., Delhi reported in 1995 (75) E.L.T. 188 (Tribunal) categorically held that what is relevant is whether defects have taken place during the manufacturing process.
3. Ld. DR on the other hand submitted that defects took place after RG 1 stage and goods were finally manufactured and therefore 57D will not apply.
4. I have heard both sides. Tribunal in case of India Gypsum Ltd. (supra) held that such defective pieces are nothing but wastes and scrap. Tribunal relied upon the earlier decisions in the case of C.C.E. v. Mysore Polymers & Rubber Products (P) Ltd. reported in 1990 (48) E.L.T. 294 (Tribunal) and C.C.E. v. Sri Chakra Tyres Ltd. reported in 1990 (50) E.L.T. 314 (Tribunal). In the case of Mysore Polymers & Rubber Products (P) Ltd. Tribunal held that any defective product which is accepted by the Authorities as not marketable and product has to be considered as “Waste”. A defective tyre and tube emerges because of some defect left in the product during the process of manufacture and hence it has to be considered that the cut tyres which are cleared, are the result of the activity during the manufacturing process.
5. Commissioner held that the Assistant Commissioner was correct in rejecting the claim of the benefit under Rule 57D on the ground such refuse and waste arose after RG 1 stage of the final product therefore could not be treated as waste. He also held that in view of the remission of duty availed 57C is attracted and no benefit can be given. In the first place I find that the show cause notice does not at all allege that goods have reached final RG 1 stage. Authorities below, therefore, plainly travelled beyond the show cause notice and on this ground alone the order is liable to be set aside. Moreover, I find that 57C can no relevance in such a case as held by the Tribunal in case of Shri Chakra Tyres Ltd. (supra) when the Tribunal referred to judgment of the Delhi High Court in case of Modi Rubber [1987 (29) E.L.T. 502 (Del.)] where it was held that it cannot be said that waste/scrap is the result of any treatment or any labour, manipulation by the Petitioner Company whereby a new and different article emerges. In such circumstances therefore Rule 57C plainly is inapplicable. What is relevant is whether waste/defects result from manufacturing process. The very fact that some pieces were defective and had to be discarded as waste and not marketable and the fact it was accepted by department that they are not marketable and therefore remission of duty was given would only indicate that such goods were waste and that defects arose during the activity of manufacture so as to render them as waste. In view of this I set aside the impugned order and allow the appeal.