Full Judgment
2. The appellant are engaged in the manufacture of bare copper wire and Enameled winding wire. Some of the goods received by their customers are rejected and sent back to the appellant. Prior to the period in question i.e. July 1997 to October 2000, the appellants were availing the modvat credit of duty paid on such rejected wires by their customers, Utilising such inputs in the manufacture of fresh wire which were being cleared by them on payment of duty. Such practise was not found favourable by their jurisdictional Central Excise Authorities, who entered into a long correspondence with the appellant and ultimately directed them that in as much as the rejected wires received by them are not being melted and remade into new wires, they cannot have modvat credit of duty paid on the damaged wires. Accordingly, they were directed not to avail modvat credit in respect of such damaged wires as they cannot be considered as inputs. On receipt of such directions, the appellant followed erstwhile rule 173H of the Central Excise rules. Accordingly, on receipt of the damaged material, they filed D 3 intimation with their jurisdictional central excise authorities, entered the damaged goods in Annexure V register, remade the goods, and cleared the same under the cover of proper invoices by making reference to the original invoice in terms of the provision of rule 173 H. All these procedures was followed by the assessee with due consent and knowledge of their judicial authorities.
3. Thereafter, the appellants were issued a show cause notice dated 19.03.2002 raising demand of duty of Rs. 13,32,259/- for the period July 97 to October 2000 alleging that in as much as the new wires were being manufactured out of the damaged and rejected wires, the said activity is not covered within the scope of rule 173 H the amounts to manufacture of new product, which the appellant should have cleared on payment of duty. The said show cause notice culminated into an order passed by the original adjudicating authorities and conformant in appeal, confirming demand of duty, as proposed in the notice and imposing penalty of identical amount. The said order are impugned before us.
4. The appellant has assailed the impugned order on merits as also on the point of limitation. Drawing our attention to the Tribunal's decision in the case of Triveni Sheet glass Works Ltd. reported in 1992 (43) ECR 595 (T), Ld. Advocate submits that meaning of the expression 'remade' used in the provision rule 173 H is of wide import and the process of transformation from old, damaged wires into a new wire is covered by the said expression. Specific reference has been made to Paragraph 24 of the said order. In any case, Ld. Advocate submits that they have stopped availing modvat credit and utilising the same for payment of duty on the new manufactured wire at the insistence of the department and switched over to provision of rule 173 H with due knowledge and consent of the revenue. In such a case, it cannot be alleged that there was any suppression on their part with a malafide intention and requisite procedure as envisaged in Rule 173 H was being followed by them under Revenue's direction. In any case, submits the Ld. Advocate that entire exercise is revenue neutral in as much as they are entitled to take credit on the rejected received back goods in terms of Larger Bench decision in the case of Bhushan Steel & Strips Ltd. reported in 2000 (119) ELT 293 (Tri-LB) and to utilise the same towards payment of duty.
5. Shri S V Parelkar, Ld. JDR appearing for the revenue and reiterates reasoning of the authorities below. He submits that process adopted by the appellant is remelting, purifying and remaking of bare copper wires and enamelled copper wire amounts to manufactured of a new product in which case, the provision of rule 173 H will not apply.
6. After considering the submissions made by both sides, we find force in the submission made by Ld. Advocate. Paragraph 24 of the Tribunal decision in the case of Triveni Sheet Glass Works Ltd, gives detailed finding on the expressions appearing in the said rule, after taking into account the earlier decisions of Tribunal as also the meaning of the re-made as appearing in international dictionaries. It observes as under: "25. In the present case the glass that is received in the damaged condition is remelted and sheet glasses are prepared out of broken glass. Therefore, in the wider meaning of the term 'remake' which will cover a process of transformation which could amount to manufacture the processes undertaken by the appellants herein of remanufacture of the glass sheet out of duty paid defective / broken glass has to be taken to be covered by the scope of Rule 173L. As the Tribunal noted in the J G Glass Ltd, case (supra), there is no other way of remaking in respect of such goods. It also can be concluded from the ratio of the case law cited supra that sheet glass received and that cleared would be of the same class to goods for the purposes of Rule 173L. It is, therefore, concluded that the meaning for the word 'remake' used in the Rule 173L is of wider import and would cover a process of transformation and implies remaking in the sense of making once again or manufacturing once more, that is, remanufacture. It is also noted that it is the understanding of the Departmental authorities also based on the Law Ministry's advice that the process of remaking under Rule 173L would amount to remanufacture. The difference of opinion is disposed off accordingly".
In view of the foregoing, it is clear from the expression 'remaking' takes into ambit, the entire process of transportation of the rejected item into a new item and if the rejected wire losses its identity, as such, the same will be covered by the expression remake as per the erstwhile rule 173H. We also note that the appellant switched over to the system of rule 173 H only at the insistence of the revenue, in which case no suppression/misstatement etc can be attributed to the appellants so as to justify invocation of longer period of limitation.
In any case, the appellants were entitled to the benefit of modvat credit in the rejected goods which credit could have been utilised by them for discharge of duty for finally remade goods. On all these issued, the appellant succeeds. Accordingly, we set aside the impugned order and allow the appeal with consequential relief to the appellant.
Stay petition also gets disposed off.