Judge grants appeal, finding goods unfit for market, justifying duty remission. Appellant exempt from duty, penalty.

The judge allowed the appeal, ruling in favor of the appellant. The judge found that the goods were not marketable and unfit for use, justifying remission of duty under Rule 21. The appellant's voluntary intimation to the department and the delay in granting permission were considered. It was determined that the goods were eligible for exemption from duty under Notification No. 67/95 as they were taken back for remanufacture within the factory. The judge concluded that there was no basis for demanding duty, interest, or imposing a penalty, providing consequential relief to the appellant.

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Issues involved:
1. Duty liability on piston rings found not marketable and unfit for use.
2. Application of Rule 21 for remission and imposition of penalty under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.
3. Intimation by the appellant to the department regarding goods for recycling.
4. Claim of exemption from payment of duty under Notification No. 67/95.

Analysis:
1. The appellant informed the department about piston rings found not marketable and unfit for use, which they intended to recycle. The department issued a show cause notice demanding duty payment, arguing that the appellant did not wait for permission before recycling the goods. Penalty was also imposed under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.

2. The appellant's counsel contended that the appellant's intimation showed no intention to evade duty, and even though there was no legal obligation to inform, they did so voluntarily. The counsel argued that the goods were taken back for remanufacture within the factory, making them eligible for exemption from duty under Notification No. 67/95. The counsel also highlighted the delay in granting permission by the department as per Board's instructions.

3. The department argued that without permission under Rule 21 of Central Excise Rules, the appellant was liable to pay duty, and mere intimation without waiting for specific permission would amount to a contravention of the rule.

4. The judge analyzed the submissions and found that the claim by the manufacturer that the goods were not marketable was sufficient under Rule 21 for remission of duty. The judge noted that the department did not indicate denial of remission in the show cause notice but simply demanded duty. The judge also explained that under Rule 16, when duty-paid goods are received back into the factory for reprocessing, Cenvat credit can be availed and used for payment of duty on finished goods. Therefore, the benefit of Notification No. 67/95 would be applicable in this case. The judge concluded that there was no case for demanding duty, interest, or imposing a penalty, and allowed the appeal with consequential relief to the appellant.

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