COMMISSIONER OF C. EX. Vs. TIN MANUFACTURING COMPANY

JUDGEMENT

(1.) THE respondents in this case are manufacturers of metal containers. Some of the metal containers manufactured and cleared (on payment of duty) by them are returned as defective by their purchasers. The respondents manufacture new metal containers out of such returned defective metal containers. The issue involved is whether they are entitled to Modvat credit of the duty they originally paid on the defective metal containers. The issue has been referred to this Larger Bench on account of differing views expressed in the decisions of the Tribunal.

(2.) THE ld. Commissioner (Appeals) took the view that the decision of the Tribunal in Akobex Metals Ltd. v. CCE -1993 (68) E.L.T. 146 applied to the case of the respondents and that Modvat credit was admissible. As against this, the Commissioner, CCE Meerut has submitted that the assessee is not entitled to Modvat credit in view of the decisions of the Tribunal in the case of I.C.I. v. CCE, Calcutta - 1997 (89) E.L.T. 216 and CCE, Bangalore v. Krishna Fabricators Pvt. Ltd. - 1996 (84) E.L.T. 304. The Commissioner has relied on the following observations in these decisions :

(3.) THE processes carried out in the respondents factory are that the defective metal containers upon receipt are deseamed and the metal sheets obtained on deseaming are sent for printing. After printing the sheets are cut to size according to specification and slit. Then they are rolled into the size of finished metal containers and sent to welding line. After these are fielded they are sent to seaming line for seaming. The defective containers are dismantled, taken back to their original stage of metal sheets and thereafter rebuilt into new containers. Thus, all the processes of manufacturing new metal containers are carried out. The assessees claim is that since manufacture of a new product takes place, the defective metal container should be treated as input and whatever duty was paid should be allowed as credit. The Commissioner (Appeals) held in the impugned order that the assessees are re -manufacturing goods by the same processes as original process, from the rejected goods. The process is not removing of defects. In view if this factual position the Commissioner held that the case covered by Tribunal's decision in Alcobax Metal Ltd. case.