Tolerance-based duty remission for aerated water breakages applies where the Board circular remains unmodified and inputs were used in manufacture.

Binding Board circulars may allow tolerance-based remission for aerated water bottle breakages during movement, storage and clearance, including monthly write-off up to 0.5%. On the facts stated, the destroyed goods fell within that tolerance and no withdrawal or modification of the circular after the Modvat/Cenvat regime was shown, so duty remission could not be denied. Where the inputs had already been used in manufacture of the final product, reversal of credit was not warranted on those facts. The operative effect was that the remission claim was accepted within the circular limit and the demand for credit reversal was unsustainable.

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Issues: Whether remission of duty was available for aerated water bottles destroyed or broken during handling and whether reversal of credit on inputs was required.

Analysis: The Board circular concerning aerated water permitted writing off breakages up to 0.5% on a monthly basis for breakages occurring during movement, storage, and clearance. The destroyed goods were within that tolerance limit. The record did not show any modification of the circular after introduction of the Modvat/Cenvat scheme, and as the inputs had been used in manufacture of the final product, reversal of credit was not warranted on the facts found.

Conclusion: The duty remission claim was able within the circular tolerance and the demand for reversal of credit was unsustainable.

Ratio Decidendi: Where a binding Board circular grants tolerance-based remission for breakage up to a specified limit and the circular has not been withdrawn or modified, duty relief cannot be denied and credit reversal cannot be insisted upon on those facts.

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