Full Judgment
1.1. The facts of the case in brief are that the respondent company manufactures pharmaceutical products under chapter 30 of the schedule to the Central Excise Tariff Act, 1985 and avails Modvat facility. It was noticed that the quantity of bottles in the actual production of the pharma goods was less than that on which Modvat credit was availed.
Show cause notice was issued for the recovery of total credit of Rs. 57,257.60 being the excess credit availed pertaining to the quantity of bottles not actually used in the manufacture of final products. After the receipt of the reply and hearing the respondent the duty demand was confirmed by the Assistant Commissioner on 26.8.1994. In the appeal preferred against the respondent it was set aside by the Commissioner.
Hence this appeal.
2. The learned JDR has contended that there is no evidence produced to show the actual number of bottles lost due to breakage. No documentary evidence is produced. No records and accounts were produced to show the loss due to breakage. So the impugned order has to be set aside and the order of the Assistant Commissioner has to be restored on the ground the inputs cannot be said to have been used in or in relation to manufacture of final products under Rule 57A of the Central Excise Rules. The glass scrap obtained after the breakage of glass bottles was not akin to waste as contemplated in Rule 57D. Actual breakage of the glass bottles and end use of the broken glass bottles during the process of the manufacture is not established. The respondent in his submission has contended that by various replies to the show cause notices it was explained to the adjudicating authorities that during the process of manufacture certain bottles break which is unavoidable and Modvat credit is admissible under Rule 57D(1). The department could not establish the breakage of the bottles being abnormal or unreasonable. The Modvat credit availed on account of breakage is not recoverable or reversible. The appeal grounds reproduced the orders of the Assistant Commissioner. The impugned order has considered the issues raised by the department in the show cause notice and order-in-original. It was specifically submitted in the appeal before the Commissioner that regular records have been kept for the receipt of glass bottles, their issue for manufacture, the quantity of final packed products and the glass bottles broken during the course of manufacture. The proportion of broken bottles to the glass bottles used is very small and reasonable. There is no contrary allegation. There is no scope of breakage of any bottles in the process of filling the final product by the appellant which is not established by the department.
The decisions in in the case of CCE, Bangalore v.Eros Pharma Pvt. Ltd. and CCE v. Glaxo (I) Ltd. apply to the case in hand.
3. Perused the authorisation issued in this case along with the appeal memorandum and the orders-in-original and orders-in-appeal. The authorisation dated 9.11.1995 issued by the Commissioner of Central Excise, Mumbai-I does not comply with the requirement of Section 35B Clause (ii) of the Central Excise Act. There is no conclusion by the Commissioner that the impugned order is not legal and valid. In the absence of it, the authorisation issued by the Commissioner is not proper as required under the above provisions. In such a circumstance, the appeal is not maintainable and cannot be allowed.
4. On the perusal of the order-in-original, order-in-appeal and the appeal memorandum, it is seen in para 4 of the impugned order that the respondent has produced the statistical data regarding the input and its usage in the process. Further it is observed that the bottles used are made of glass, there is possibility of breakage in the process of manufacture. The observation of the Assistant Commissioner that it is only an alibi is not established by stating the process of manufacture and concluding that there is no scope of breakage of any bottle in the process of filling the final product by the respondent. The impugned order is well-founded and the decision in in the case of CCE v. Glaxo (I) Ltd. clearly supports the claim of the respondent.
According to the said decision, no assessee can be put to strict proof of justifying the numbers of glass bottles' breakage as it differs from unit to unit and would depend upon man and machine efficiency as well as the quantity of the bottles. It is necessary to make an all industry assessment (vide para 5). Rule 57D of the Central Excise Rules is considered and in the case of CCE, Bangalore v. Eros Pharma Pvt. Ltd. was relied upon. This decision supports the impugned order. So under these circumstances, the contention of the appellant cannot be upheld and it is rejected. In view of this, the appeal cannot be allowed and hence it is rejected.