1. A very short question is involved in the present three appeals. The appellants are engaged in the manufacture of cement which they are filling into P.P. & Paper Bags. They are availing modvat credit on the said bags. It is seen that during the period held in the present appeal, certain number of P.P. Bags got bursted while they were being checked for filling operation. The said bursted bags were subsequently cleared by the appellants on payment of duty, which was either debited by them from their RG 23A Part II records or from PLA.2. The appellants were issued show-cause notices proposing recovery of modvat credit in respect of the said bursted bags. Three adjudication orders were passed confirming demand of duty of Rs. 1,47,479. The said order passed by the original adjudicating authority was upheld by the Commissioner (Appeals). While upholding the order, the Commissioner (Appeals) has observed as under: " On careful examination of case records, I find that the issue involved in these cases is denial of modvat credit in respect of P.P. & Paper Bags got burst/damaged prior to packing of cement during the period from Mar. '98 to Feb. '99 the said P.P. Bags, being used in the packing of cement, have been considered as inputs and since the said bags got burst/damaged in course of packing operation, the appellants have claimed that credit cannot be denied under Rule 57D. In the impugned orders the lower authority has turned down such plea on the ground that the said bags got burst before they go into production due to non-resistance of defective bags to the pressure of the packing machine, and such burst bags cannot be said to have generated at the time of manufacture of cement, and for the said reasons, Rule 57D is not applicable to the said burst bags. In this context, I find that after receipt of bags in the factory, there are two operations. First, bags are put into packing machine to see whether such bags are fit for packing of cement, and then bags found fit go into filling operation. The appellants take the two operations into one, and consider the same as filling operation as a whole. However, they could not contradict the observations of the lower authority that such bags did not get burst in course of filling operation for packing cement in the bags, but got burst prior to filling operation in course of testing of bags to see whether bags brought into the factory are fit for consumption. Since the damaged bags were not used in filling operation for packing cement in the bags, it cannot be held that the same have any role in making the cement marketable, and, ipso facto, have any role in the process of manufacture. Therefore, the Apex Court's decision in the case of CCE v. Eastend Paper Industries Ltd., 1989 (24) ECC 375 (SC) : 1989 (43) ELT 203, as relied upon by the appellants, is distinguishable. Further, since such damaged/burst bags have not been used in the process of manufacture, Rule 57D will not come into operation, as rightly held by the lower authority in the impugned order. The case laws, cited by the appellants, are also distinguishable inasmuch as in all the cases, packing materials viz. glass bottles, metal containers, P.P. Corks etc. got managed/broken in course of manufacturing operation, and, hence, the same do not come to their rescue, 20. In view of the foregoing, I differ from the views taken by my predecessors vide Order-in-Appeal No. 45/CE/GHY/01 dated 16,3.01, and hold that denial of credit on damaged/burst bags, as made in the impugned orders, is correct in law, and; thus, the appellants are liable to pay duty alongwith interest, as leviable, and, for unauthorised availment of modvat credit, imposition of penalties in the impugned orders is also legal and proper." 3. The appellants' contention duly represented by Shri C.R. Das, Ld.
Advocate is that when the bags were received by them, they were in good condition and it is only subsequently at the time of filling of the cement, the same bags got bursted on account of pressure of the packing machine. Such bursted bags are covered by the provisions of Rule 57D and the Revenue authority observation that such bursted bags cannot be called as inputs or waste arising out during the course of manufacture of cement, is not correct inasmuch as in a number of cases, it has been held that the manufacturing process start from initial stage of handling of inputs. It is on record that the bags were duly entered in their records and were issued for packing purposes when subsequently they were bursted. As such, the stage of bursting of bags has to be held as inputs used in or in relation to the manufacture of the final product.
4. The appellants have also contended that they have cleared the bursted bags on payment of duty. There was no provisions for payment of duty of such bursted bags as they were in the nature of waste and scrap. Shri Das has submitted that the duty paid by them on such bursted bags at the time of clearance was much more than the modvat credit involved. As such, the Revenue's direction again to debit modvat credit in respect of the bags in question is un-justified.
5. Shri Das has also submitted that earlier they were granted relief by the Commissioner (Appeals) as mentioned in the present impugned order.
The Revenue had riot filed any appeal against the earlier order of the Commissioner (Appeals) and as such the same had attained finality and the legal position was accepted by the Revenue. The Tribunal in the case of M/s. WPIL Ltd. v. Commr. of Central Excise, Cal.-III, 2003 (87) ECC 145 (Tri.) : 2003(153) ELT 565 (Tri.Kol.) has held that the earlier order of Commissioner (Appeals) is binding on the Excise authorities, if no further appeal has been filed with the Tribunal. In the circumstances, he prays for setting aside the impugned order.
7. I have considered the submissions made from both the sides and find lot of force in the submissions of the Ld. Advocate. There is no provisions for payment of duty on the bursted bags at the time of clearance of the same inasmuch as the appellants are neither the manufacturer of the bags nor clearing the bags i.e. inputs "as such".
The appellants' stand is that duty paid on the said bursted "bags either from PLA or from modvat account is required to be considered as reversal of modvat credit, if at all, the said bursted bags are not covered by the provisions of Rule 57D. The above plea was taken by the appellants before both the lower authorities who have not commented upon the same. As such without going into the legal question as to whether such bursted bags would be covered by the provisions of Rule 57D or not, I set aside the impugned order and remand the matter to the Assistant Commissioner for verification of the appellants' contention that the duty paid by them at the time of clearance of the bursted bags was more than the amount of credit availed by them. However, the appellants are at liberty to put forth their contention about the applicability of the provisions of Rule 57D before the Assistant Commissioner who would decide the same. The adjudicating authority would also look into the aspect of filing of any appeal by the Revenue against the earlier order of the Commissioner (Appeals). AH the three appeals are remanded for de novo decision in the light of the observations made by me in the preceding paragraph. Stay petitions also get disposed of.