APOLLO TYRES LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant is engaged in the manufacture of automotive tyres and tubes. Their manufacturing plant at Pune manufactures only tubes. These tubes are cleared (on payment of duty) to the tyre manufacturing units which use the goods captively in the manufacture of motor vehicle parts. In 2002 -03, the Pune unit had cleared several consignments of tubes on stock -transfer basis to a tyre manufacturing unit, but some of these consignments were returned to the appellant (Pune unit) for what is called as 'logistical reason'. CENVAT credit of the duty paid by the appellant on the original clearances was taken by them upon receipt of the goods returned by the tyre unit. In the D -3 intimation given to the department, the appellant furnished particulars of the goods received back from the tyre manufacturing unit and also stated the purpose as 'storage'. The returned tubes, on which CENVAT credit was taken, were subsequently cleared to other tyre manufacturing unit of the same company on payment of duty under Section 4 of the Central Excise Act. These second clearances were effected during the period from July, 2002 to April, 2003. In a show -cause notice issued on 09/07/2007, the department noted that the appellant had not undertaken any manufacturing process on the goods received back under Rule 16(1) of the Central Excise Rules, 2002 and was hence liable to pay duty on the second clearances, equal to the amount of CENVAT credit taken on the goods returned by the tyre manufacturing unit to which the goods had been originally cleared. The duty paid on the second clearances was based on the value determined under Section 4 of the Act, which was lower than the amount of CENVAT credit. The show -cause notice demanded the differential amount under the proviso to Section 11A(1) of the Act on the ground of "contravention of rules with intent to evade payment of duty". It also proposed to recover interest on duty under Section 11AB of the Act, besides proposing penalty under Section 11AC of the Act. These proposals were contested. In adjudication of the dispute, the Assistant Commissioner demanded differential duty of Rs. 55,028.98 from the appellant under Section 11A along with interest thereon under Section 11AB of the Act. He also imposed penalty equal to duty on the assessee under Section 11AC of the Act. The order -in -original was upheld by the Commissioner (Appeals) in an appeal filed by the assessee. Hence the present appeal of the assessee.

(2.) I have examined the records, which indicate that the demand of duty, which has been raised under the proviso to Section 11A(1) of the Act, is in terms of Sub -rule (2) of Rule 16 of he Central Excise Rules, 2002. The goods returned by the original consignee were admittedly received by the appellant (Pune unit) under Sub -rule (1) of Rule 16. These Sub -rules read as follows:

(3.) I have given careful consideration to the submissions. The case on merits would rest on correct interpretation of Rule 16. This provision was examined by a Division Bench of this Tribunal in the case of Hindalco Industries Ltd. (supra), but, in that case, the first clearances were rejected by the consignee and hence brought back to the assessee's factory. After undertaking certain processes, in which waste and scrap were generated, the assessee cleared such waste and scrap on payment of duty at the rate applicable on the date of removal. The Tribunal found that the waste / scrap did not arise out of any process of 'manufacture' and hence the credit taken by the assessee requires to be reversed under Rule 16(2). The Tribunal held that, if the process to which the goods returned by the original consignee were subjected to did not amount to 'manufacture', the amount of credit availed under Sub -rule (1) of Rule 16 had to be reversed under Sub -rule (2). In the instant case, the tubes returned by the original consignee were removed as such without any process whatsoever. Even the show -cause notice admits these facts. The question is whether the second clearances of the goods would be covered by the first part of Sub -rule (2) of Rule 16 as canvassed by the Revenue or by the second part of the Sub -rule as contended by the assessee. In this context, it is pertinent to note that the goods returned by the original assignee were admittedly received by the assessee under Sub -rule (1). They were received in the assessee's factory "for being re -made, refined, re -conditioned or for any other reason". Learned SDR has chosen to read the underlined expression ejusdem generis with the preceding expressions (re -made, refined, etc.). He means to say that, under Sub -rule (1) of Rule 16, duty -paid goods returned by a customer can be brought back to the factory of production only for some kind of a process. On the other hand, the learned Counsel has argued that such goods could be brought back into the factory of production for "any other reason" also. He submits, the appellant cleared the goods as such, for "logistic reasons", to other tyre -manufacturing units of the company. Learned Counsel has endeavoured to fortify his arguments by referring to the expression, 'in any other case' found in the text of Sub -rule (2).