Full Judgment
2.2 Shri L.P. Asthana, learned Advocate, submitted that Cathode Ray Tubes are used in the manufacture of Oscilloscopes and Modular Measuring Instruments which are highly technical and scientific in nature and are subjected to vigorous testing during the production of these instruments; that testing of Cathode Ray Tubes have been carried out at various stages in the production Department i.e. before they are being fitted into the instruments as well as after being fitted; that if at any stage of the production, it is found that Cathode Ray Tubes are defective, the same is rejected as waste and scrap; that Modvat Credit is available to them since such rejection is in course of manufacturing activity and as per Rule 57-D Modvat Credit cannot be varied or denied on the ground that part of input has gone waste.
2.3 We have considered the submissions of both the sides. Under Rule 57A of the Central Excise Rules, 1944, at the relevant time, MODVAT Credit of the duty paid on the inputs is available if such inputs are used in or in relation to manufacture of the final products. It is the case of the Revenue that these tubes were found damaged or defective before being taken into the process of manufacture. We find force in the submissions of the learned SDR that once the impugned tubes have been found to be damaged or defective, the same cannot be said to have been used in or in relation to manufacture of the final products.
Provisions of Rule 57D(1) of the Rules would come into play only in respect of inputs contained in any waste, refuse or by-product arising during the manufacture of the final product. Nothing has been brought on record to show that the Cathode Ray Tubes were scrapped during the process of manufacture. Accordingly we hold that the Respondents are not eligible to Modvat Credit of duty paid in respect of damaged, defective Cathode Ray Tubes. The Revenue's Appeals on this count is allowed.
3. The learned SDR also mentioned that the Additional Commissioner has confirmed the demand of duty in respect of parts of Oscilloscope used for replacing in instruments received for repair by M/s. Scientific Sales; that the Commissioner (Appeals) has accepted the contention of the Respondent No. 1 about the rate of duty and ordered that duty should have been calculated @ 5% Advalorem since the Respondent No. 1 is eligible for small scale industry exemption; that the duty payable by the Respondent No. 1, in terms of Rule 57F(1), would be equal to the amount of Credit availed by them in respect of inputs used for repairing the instruments. We agree with the submissions of the learned SDR that when the inputs are removed as such, the duty of excise shall be the amount of Credit that has been availed in respect of such inputs under Rule 57A of the Central Excise Rules, 1944.
4.1 Regarding denial of SSI exemption under Notification No. 175/86-C& dated 1.3.86, learned SDR contended that the Adjudicating Authority has denied the same as both the Respondents were affixing their goods with the Brand name "HM" of a foreign company i.e. Hameg Gmbh of West Germany; that Commissioner (Appeals) has allowed them the benefit of the said Notification on the ground that the Brand name of foreign company is "HAMEG" and not "HM" which is used to differentiate the Models of Oscilloscopes; that their brand name is "Scientific" which has been used on the goods manufactured by them and in correspondence and catalogues, He, further, contended that as both the Respondents are using Monogram/Mark "HM" which is owned by a foreign company and Shri C.D. Biyani, Manager of Respondent No. 2 had deposed that their company is engaged in importing of technical know how and guidance for manufacture of "HM" Models Oscilloscopes; that words "HM" signify as a symbol for the model in the commercial market.
4.2 The learned Advocate submitted that "HM" is not a Brand name and it indicates the type of Oscilloscopes; that the brand name of foreign company is "HAMEG" and their brand name is "Scientific" which is printed on their instruments. He had also produced a copy of the Certificate of Registration of Trade Marks of Federal Republic of Germany for "HAMEG" for measuring and monitoring devices.
4.3 After considering the submission of both the sides, we agree with the findings in the impugned Orders that "HM" is not a brand name of another person. The Revenue has not been able to controvert the contention of the Respondents that "HM" indicate the model of Oscilloscopes, The Respondents' contention that their goods bear their own brand name "Scientific" has also not been controverted by the Revenue. In view of this, it cannot be said that the goods manufactured by the Respondents were affixed with the brand name of a foreign company. Accordingly benefit of Notification No. 175 /86-CE has, been rightly allowed to them under the impugned Orders. The Revenue's appeals are thus rejected on this aspect.
5. The learned SDR submitted that M/s. Scientific Sales have admitted the clearance of 21 instruments for testing purposes and could riot produce any evidence for return of the same; that similarly M/s.
Scientific Mes-Tech P. Ltd. had removed Oscilloscope without accounting in statutory records and removed the same without payment of duty and without issuing gate passes. We observe that the detailed explanations submitted by both the Respondents have not been considered by the Adjudicating Authority. We are, therefore, remanding this aspect to the Adjudicating Authority for re-examination and consideration after taking into consideration all the material adduced by the respondents and after affording a reasonable opportunity of hearing to both the respondents.
6. Regarding parts of Oscilloscope cleared by M/s. Scientific Mes-Tech P. Ltd. the learned Commissioner in Order-in-Appeal No.1240-CE/BPL/2000 dated 4.12.2000 has given his findings as under: "On the issue of demand of duty on parts since the appellant is not Pressing the issue of their liability to amount of duty but has contested the rate of duty which according to them should be 5% Advl. available for SSI units instead of 15% Advl. at which it has been calculated and charged, I find that since the appellant is eligible for SSI exemption, the duty should have been calculated @ 5% Advl. which was the rate applicable at the relevant time for SSI. I hold accordingly." In the memorandum of Appeal, Revenue has only mentioned that the parts have separate identity with distinct use and characters and as such are goods and capable of being sold in the specific market. Revenue has thus not challenged the extension of benefit of SSI Notification to the Respondent No. 2. The Commissioner (Appeals) has only ordered to extend the benefit of SSI Notification. As there is no challenge to the said finding, the impugned Order is to be upheld on this Court.