Full Judgment
Thereafter they were re-charged into furnace, melted, cast and rolled to make new copper rods of the same diameter and specification as those described for remaking and thereafter they were removed without payment of duty which is permissible under 173H of Central Excise Rules.
Show-cause Notice was issued on 2.8.93 on the ground that remaking carried out on the rejected rods amounted to manufacture as the rejected goods were mixed with fresh raw materials, melted in furnace and new rod manufactured. The Jurisdictional Asstt. Commissioner of Central Excise, Pune, confirmed the demand under his Order-in-Original dated 23.3.94 and imposed penalty of Rs. 5000/-. AC's order was challenged in appeal and the Commissioner (Appeals) in the impugned order followed the Tribunal decision in the case of J.G. Glass Ltd. and on a Collectorate Trade Notice 38/92 dated 4.9.92 and the Collector (Appeals) held that the defects for which the rods were returned, can be removed only by melting and not otherwise. He further found that the respondent is not bringing into existence any new product. He allowed the appeal.
2. Shri K.L. Ramteke, the learned DR contended that the Collector (Appeals) has erred in holding the respondent eligible for facility under 173H for the products in question because the rule requires that the process of remaking should be such that it falls short of re-manufacture. The process carried out in this case according to the department amounts to manufacture of new rods. The DR further urged that the Tribunal decision relied upon by the Collector (Appeals) is now challenged before the honourable Allahabad High Court and therefore that decision cannot be applied in the present case. It was further submitted that the Collector (Appeals) has failed to appreciate the decision of the Tribunal in the case of Shriram Pistons & Springs Ltd. v. CCE 1983 ELT 927 wherein the Tribunal has held that the process of remelting and remaking of pistol amounted to manufacture as defined under Section 2f of Central Excise Act and would not be availed under the scope 173H.3. Learned Counsel for the respondent, Shri Vipin Jain contended that the above said decision of Shriram Pistons & Springs Ltd. has been referred to and distinguished the decision in the case of Shriram Refrigerators Ltd. v. CCE . It was held by the Tribunal that in Shriram Piston case what was returned were scrapped pistons and new pistons were made therefrom and therefore it was a case of conversion of scrap into a distinct commodity known as piston. On the other hand, the learned Counsel relied upon Shriram Refrigerators decision of the Tribunal to urge that the process remelting and remanufacturing of the copper rods carried out by the respondent will fit in with provision of Rule 173H. The Tribunal in that decision has also referred with approval to the Government of India instructions under Rule 173H which is dated 26.6.76 and which was issued simultaneously when the rule 173H was amended. The instructions as quoted by the Tribunal reads "it may, however, by noted that re-making, refining, re-conditioning or subjecting the goods to any other similar process, will not amount to manufacture if the goods are subsequently cleared after rectification of defect in the same form in which they were sold or brought into the factory".
4. The learned Counsel in this case, said that the admitted position is that after remelting or remaking, the copper rods of the same specification are cleared as were received back from the customers as described. The learned Counsel further referred to instructions on the same lines issued by the various Collectorate as Trade notices one of which, namely. Trade Notice 38/92 dated 4.9.92, has been relied upon and quoted by the Commissioner (Appeals) in the impugned order. The learned Counsel cited the Supreme Court judgment in the case of Ranade Micro Nutrient v. CCE 1986 (87) ELT 19 wherein the Supreme Court has held that the departmental circulars are binding on authorities who are subordinate to the Central Board of Excise and Customs and further held that it would not lie in the mouth of Revenue to repudiate circular issued by the Board on the basis of its variance with the statutory provision. On similar line, the learned Counsel cited the Supreme Court judgment Eullerman v. CCE wherein the Supreme Court held that direction given in a departmental circular even if a deviation of the provision of the Act. yet it would be binding on the IT officers.
5. The submissions made by both the parties have been carefully considered. The appellants have received back copper rods of certain specification which had been returned to them by the customer due to defects or surfacie imperfection. By the very nature of the goods and the defects thereon, the remedy lies only in remelting and remaking of the rods which has been undertaken by the respondent. But after these processes, the rods are remade to the same specifications as those that had been returned to the respondent factory as defective, and about whose return the respondent has also intimated the department in Form D-3. When such is the position, the Government of India instruction extracted above would be correctly applicable, because the admitted position is that the rods after remaking have been subsequently cleared in the same form in which they were brought back into the respondents factory with the same specification. This position has been recognized in the Tribunal decision in the case of J.G. Glass supra. The Tribunal held in that case that in respect of rejected glass-wires, there is no other way of remaking the defect in the duty paid rejected glass-wires except by way of remaking. The situation is again recognized in the trade notice issued by the Collectorates, one of which his been extracted in the impugned order by the Collectorate (Appeals). The Trade notice refers to provisions on 173H(3). The Trade notice recognized any defective fabrics received back for removing the defects into the factory, then it is quite natural that some of the process of manufacture will be repeated when defective fabrics come back to the factory of the processors, and each of these process like dyeing stentering, heat setting etc. amount to manufacture: when the said processes are repeated on processed fabrics which have already discharged duty liability the Trade Notice clarified, it cannot be said that those repeated manufacturing process have brought into a existence a new product. Trade notice concludes that there is no reason therefore to deny the processors of such fabrics the facility under Rule 173H.Therefore, in view of the foregoing, the Collector (Appeals) was right in holding that the respondents, are eligible for the facility under Rule 173H Central Excise Rules in respect of copper rods received back for remaking. The fact that the decision of the Tribunal in J. G. Glass supra is under challenge in the Allahabad High Court would not be a bar for it to be a precedent unless it is shown by the department that the operation of the Tribunal order has been stayed by the Allahabad High Court. The learned DR has no information that it has been so stayed. In the result, the impugned order is upheld and the appeal is rejected.