COMMISSIONER OF CENTRAL EXCISE Vs. SUPREME INDUSTRIES

JUDGEMENT

(1.) These three appeals filed by the Commissioner of Central Excise, Pondicherry are directed against the order in Appeal No. 210 to 212 -TRY(ADK) dated 15 -11 -2002 passed by the Commissioner of Customs and Central Excise (Appeals), Trichy by which the Commissioner has allowed the appeals filed by the assessee -respondents and set aside the order passed by the original authority.

(2.) Brief facts of the case are that the assessee -respondents are engaged in the manufacture of plastic moulded crates and furniture falling under Chapters 39 and 94 for which they have set up two factories viz. Unit No. 1 and Unit No. 2 at Pondicherry. In some cases plastic moulded furniture cleared on payment of duty were returned to them due to manufacturing defects for re -making which is done by crushing and grinding the furniture into granules and melting and re -moulding into plastic furniture. For the said purpose, plastic chips obtained from grinding the returned plastic furniture are mixed up with virgin chips. On receipt of the returned duty paid goods, procedure prescribed under Rule 173L was being scrupulously followed by the assessee by filing D -3 intimation within 24 hours from the time of receipt and the receipt is verified within 48 hours thereafter and an account is maintained showing receipt and remanufacture and clearance of the goods subsequently on payment of duty again. The refund claim filed by the assessee was in respect of the duty originally paid and the claims were filed within the prescribed period under Section 11B of the Central Excise Act, 1944. 2.1. Show cause notices were issued to the assessee proposing to reject the refund claims filed by them on the ground that the rejected and returned damaged plastic furniture were scrapped and converted into plastic ground chips and then cleared for captive consumption for making fresh plastic furniture and since the plastic ground chips/granules were the outcome of those materials and the final goods were also removed in terms of Rule 49 of the C.E. Rules, 1944, the returned goods removed after repair/re -conditioning fall under different class of goods and therefore refund was not admissible in terms of the provisions of Rule 173L(3) (iii) and the show cause notices culminated in the orders of adjudication passed by the Original Authority whereby he has confirmed duty and imposed penalty and on appeal, the lower appellate authority allowed the appeal of the assessee -respondents, as noted above.

(3.) Smt R. Bhagyadevi, learned SDR appearing on behalf of the Revenue referred to the grounds taken in the appeals and submitted that the value of the goods at the time of return to the factory was less than the amount of duty originally paid on the goods at the time of its initial clearance from the factory. She has further submitted the assessee have shown in the balance sheet that returned goods were scraped by them and then used in the production of plastic chips/granules. They were mixed with virgin material and then used in the manufacture of moulded furniture, argued the SDR. Therefore, it was not possible to establish double payment of duty on the same goods as the entire quantity of returned material re -ground into plastic chips were spread in the manufacture of so many batches of the finished goods. She has also invited our attention to the decision of the Tribvinal in the case of Peacock Industries Ltd. v. CCE, Jaipur -II reported in 2001 (129) E.L.T. 476 (Tri. -Del.) wherein in respect of the returned goods where the value was found to be less than the duty paid at the time of their clearance, refund was not allowed. She also submitted that in the present case, the returned goods were not used for production of the goods of same class and hence there was contravention of Rule 173L(3)(iii). In the circumstances she submitted that the order passed by the lower appellate authority is not in order and she prayed for setting aside the same and restoring the orders in original.