Judgment:
2. The Department found excess stock of refractory bricks and motors within the factory premises outside the Bonded Store Room. The appellants later on, explained that these were to be used internally in repairing and re-lining of furnaces/kilns. The appellants have also claimed exemption for the impugned goods under Notification No.217/86-CE dated 2.4.86. In the first round of dispute, when the matter reached the Tribunal, it had remanded the case to the lower Appellate Authority with a direction to give a finding as to whether the furnaces/kilns in which these goods were used, are movable and removable properties or not, and accordingly, to decide the eligibility of Notification No. 217/86-CE. The lower Appellate Authority has decided that the appellants are not eligible to such exemption leading to this appeal.
3. The learned Advocate appearing for the appellants states that the impugned goods have been used within the factory of production for repairing and relining of furnaces/kilns which in turn have been used for producing refractory bricks and other materials, and such finished goods have been cleared on payment of duty. He states that there are series of decisions of the Tribunal under which refractory materials such as bricks and motors, have been allowed the benefit of Notification No. 217/86-CE for such use, besides relying on the following decisions in this context: (iii) 2002 (150) ELT 743 (Tri. - Bang.) Rashtriya Ispat Nigam Ltd. v. Commr. of. C.Ex., Vishakhapatnam; 4. Heard the learned S.D.R. who states that the appellants should not have removed the impugned goods from the Bonded Store Room without payment of duty and without intimating the Department. He states that this is surprising that the appellants have described the products as defective and broken and later on, claimed to have used the same in repair and maintenance.
5. After hearing both sides and perusal of case records, we find that the appellants are at fault for not accounting for the impugned goods while removing the goods from the Bonded Store Room. However, we find that under the cited decisions of the Tribunal, the Notification No.217/86-CE has been liberally interpreted. Since the Notification uses the words, "used in or in relation to the manufacture of final products", the exemption has been allowed in respect of the refractory bricks and motors used within the factory of production. Further, in view of the fact that the refractory materials produced by the appellants have ultimately been cleared on payment of duty, it is required to be held that the impugned goods have been used in relation to the manufacture of the finished excisable goods. The argument advanced by the learned S.D.R. that the appellants have described the bricks and motors as broken and damaged, is of no consequence. While the appellants may be unable to (sic) the impugned goods which are defective ones, the same may be utilized in repairing and relining of furnaces/kilns in the factory of the appellants.
5.1. In view of our finding as above, while we hold that the appellants are eligible for the exemption under Notification No. 217/96-CE in respect of the impugned goods which have been used within the factory of production, we are of the view that they are liable to some penalty for the fact of removing the impugned goods from the Bonded Store Room without proper entry in the account books and without intimation to the Department. Accordingly, while setting aside the duty-demand, we determine the penalty as Rs. 25,000/- (Rupees twenty-five thousand) in place of the penalty of Rs. 2 lakh (Rupees two lakh) determined by the lower Appellate Authority. We order accordingly.