CCE Vs. SARALEE HOUSEHOLD BODYCARE INDIA

JUDGEMENT

(1.) THIS appeal filed by the Revenue is against the order in Appeal No. 94/2002 (M -III) dated 21.6.02 passed by the Commissioner of Central Excise (Appeals), Chennai by which he has allowed the appeal of the respondents -assessee and set aside the order passed by the adjudicating authority.

(2.) THE brief facts of the case are that the respondents - assessee are engaged in the manufacture of polishes under the brand name "Kiwi" for footwear and toilet preparations under the brand name of "flush Kleen", falling under Chapters 34 and 33 respectively. They have purchased containers, and packing materials from outside, and have availed Modvat Credit on the same as input for use in relation to the manufacture of their final products. Some times these packing materials and containers are rejected as defective and returned to the supplier for repair, rectification and return along with Rule 57F(4) challans and some times, these are merely returned, as line rejections, to the supplier as rejected material or scrap and debit notes were raised for the same. These reject consist of both duty paid inputs and non duty paid non -excisable inputs. Proceedings were initiated against. the appellants consequent to the visit of the officers to the premises of the appellants by issue of show cause notice dated 24.11.2000 on allegation that the return of rejected material and scrap to the suppliers and failure to reverse the credit taken on the input was not intimated to the department. It was also alleged that the assessee has removed used containers and damage scrap materials, without payment of duty and not under Rule 52A. The show cause notice culminated in the order of adjudication passed by the Additional Commissioner whereby he had confirmed the duty already paid to the extent of Rs. 1,56,669/ - and imposed mandatory penalty of Rs. 1,18,443/ - under Section 11AC of the Act apart from penalty of Rs. 10,000/ - under Rule 173Q of the CE Rules, 1944. He has also ordered for charging interest under Section 11AB of the Act. On appeal before the commissioner (Appeals) the Commissioner ( Appeals) allowed the appeal and set aside the order of the original authority holding that demand of duty on production line rejects is not sustainable in law as the provisions of Rule 57D are applicable to the facts of the case. It is against this order of the commissioner (Appeals), the Revenue has come in appeal on the following grounds : (a) The assessee violated Rule 57F(3) and cleared inputs without payment of duty in contravention of Rule 57F(3) by removing the "line rejections" i.e. inputs rejected after issue for manufacture) under debit notes to the input supplier without payment of duty. (b) The facts and circumstances of this case have nothing to do with Rule 57D because in the instant case, the inputs had been cleared to the supplier as such by raising debit notes and the assessee ought to have followed Rule 57F(3) and cleared the inputs on payment of duty. (c) The inputs were actually cleared outside the factory to the supplier as per their delivery challans and not at all used in the factory for the manufacture of final products.

(3.) SHRI A Jayachandran, learned JDR for the Department reiterated the grouds of appeal and sought for allowing the appeal.