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Issues: (i) Whether the pending application for relaxation under Rule 173H(2) of the Central Excise Rules, 1944 had to be decided before confirming the duty demand. (ii) Whether the duty-paid character of the returned goods could be established by collateral evidence despite non-production of the original duty paying documents.
Issue (i): Whether the pending application for relaxation under Rule 173H(2) of the Central Excise Rules, 1944 had to be decided before confirming the duty demand.
Analysis: The relaxation request under Rule 173H(2) had remained pending before the Assistant Commissioner. The demand was confirmed without first disposing of that request. In such a situation, the authority was required to consider the application for relaxation and then proceed to adjudicate the demand.
Conclusion: This issue was decided in favour of the appellant.
Issue (ii): Whether the duty-paid character of the returned goods could be established by collateral evidence despite non-production of the original duty paying documents.
Analysis: The returned barrels were said to have been reprocessed, and an explanation was offered for the inability to produce the duplicate copies of the original documents because portions of the cleared goods had been retained by customers for Modvat credit purposes. The duty-paid character of the goods could not be rejected merely on a technical ground if it was otherwise supportable by collateral evidence.
Conclusion: This issue was decided in favour of the appellant.
Final Conclusion: The duty demand was set aside and the matter was sent back for fresh consideration after disposal of the relaxation application and examination of the evidentiary basis regarding the returned goods.
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