ESTER INDUSTRIES LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE issue for decision in this appeal is the admissibility of Modvat credit under Rule 57A of the Central Excise Rules, 1944 on defective/rejected polyester films manufactured and cleared by the appellants herein but returned to them by their customers.

(2.) ON hearing both the sides, we find that the issue stands settled in favour of the assessees by the two decisions of the Larger Bench - one in the case of Commissioner of Central Excise, Meerut v. Tin Manufacturing Company reported in 2000 (39) RLT 197 and the second in the case of Commissioner of Central Excise, Meerut v. Bhushan Steels and Strips Ltd. reported in 2000 (39) RLT 200. In both these cases, it has been held that defective final product returned to the manufacturer is to be treated as eligible for Modvat credit as it was subjected to the process of manufacture once again. In the first case cited supra, the defective metal containers were returned to the respondents who dismantled and re -built the same into new containers. The second case relates to defective cold -rolled coil and cold -rolled sheets which were received back for re -processing and then cleared once again. In the present case, defective polyester films were returned to the appellants herein; re -cycled and fresh polyester film was manufactured out of the recycled material, thus involving a process of manufacture. The ratio of the Larger Bench decision is directly applicable to the facts of the present case and therefore, following the same, we set aside the impugned order and allow the appeal.