TaxTMI 
TaxTMI 
1994 (10) TMI 162
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....on the inputs used in the manufacture of the said goods (which were to be destroyed) will be reversed by making a suitable debit entry in RG 23A Pt. II Register. The appellants accordingly debited the relevant sum under protest on account of the inputs credit availed of on the inputs contained in the goods which were destroyed. The decision of the Collector was conveyed by the Asstt. Collector to the appellants under cover of his letter dt. 1-6-1989 in which it was clearly indicated that the modvat credit if any taken on the inputs used in the manufacture of the said goods will be reversed by making a suitable debit entry in the RG 23A Pt. II Register of the appellants. These conditions were imposed by the Collector in terms of the authority granted to him under Rule 49 of the Central Excise Rules. Therefore this is a decision by the Collector under the provisions of the Central Excise Rules and all that the Asstt. Collector did is to go by this decision of the Collector only since the destruction was allowed subject to certain conditions one of which was the reversal of the modvat credit. Therefore, unless the said decision is appealed against and annulled by the higher appellate ....
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....d by the Asstt. Collector, inasmuch as the Collector (Appeals) had held that, the Collector had permitted destruction of the material under certain conditions and that unless those conditions were complied with by the appellant, the order of destruction could not be implemented and, therefore the ld. Counsel submitted that the ld. Collector (Appeals) had passed the order, was not a speaking order nor did it deal with issues raised. In support of this contention the ld. Counsel relied on the decision of the Tribunal in the case of Foam Rubber Factory v. CCE, reported in 1989 (43) E.L.T. 489 and in the case of Brooke Bond India Ltd. v. CCE, reported in 1983 (13) E.L.T. 1169. The ld. Collector (Appeals) had erred in holding that having not appealed against the order, the appellants have deprived themselves of their right to question the same decision before the lower authority by claiming the refund and that if the Asstt. Collector had allowed the refund claim he would have negatived the conditions laid down by the Collector. On this ground alone the ld. Collector (Appeals) rejected the appeal of the appellant. The ld. Counsel submitted that the ld. Collector (Appeals) findings are no....
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....;Shri B.D. Bhagat, the ld. JDR, appearing for the respondent submitted that Rule 49 read with interpretary rules clearly shows that even semi-finished products are final products and that once the Collector had allowed destruction of the goods under certain conditions and one of the condition was that the Modvat credit on that portion of the inputs which was used in the manufacture of the goods allowed to be destroyed should be reversed, this condition should have been observed by the appellant; that since this condition was not observed, therefore, the lower authorities had rightly rejected the refund claim. The ld. JDR also submitted that remission of duty on the goods destroyed coupled with the remission of duty on the inputs used in the manufacture of these goods will amount to creating bonanza for the appellants which he contended was not the intention of the framers of the law, that is why there is a specific provision under Rule 49 that the Collector may prescribe certain conditions while permitting destruction of the goods. Referring to the order of the Collector (Appeals) that appeal proper should have been filed against the order communicated by the Asstt. Collector, the ....
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....ime in 1981 and this provision has been specifically made to take care that the assessees may not be required to vary the credit because some waste, etc. arise during the process of manufacture. The term 'during the process of manufacture' has to be understood with reference to the various processes which take place culminating in the production, in the end, of the product in respect of which benefit under Rule 56A was allowed. Any defective product, which is accepted by the authorities as not marketable and product, has to be considered as waste. A defective tyre and tube emerges because of some defect left in the product during the process of manufacture and hence it has to be considered that the cut tyres and tubes which are cleared, are the result of the activity during the manufacturing process. The departmental authorities themselves in the context of Modvat credit under Rule 57D(1), as evidenced by the Trade Notice No. 197/89, dated 20-10-1989 of Karnataka Collectorate, have taken this view. The explanation added to sub-rule (2) of Rule 56A of later date and it is to give relief to the manufacturers who, no doubt, had utilised the inputs in the manufacturing stream for the i....
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....e and tube emerges because of some defect left in the product during the process of manufacture and any defective product which is accepted by the authorities as not marketable end-product, has to be considered as waste and the Tribunal further observed that any defective product which emerges in the manufacturing process has to be given the status of waste or by-product and the credit to be taken in respect of the inputs contained therein has to be taken to be available to the appellants." 6. We also find that the issue has been clarified in the Trade Notice No. 14/MODVAT/89-115/89, dt. 20-11-1989 issued by the Collector of Central Excise, Madurai which reads as under :- "Admissibility of Modvat credit on 'cut tyres and tubes' clarification Regarding doubts had been raised as to whether 'cut tyres and cut tubes' would be classifiable under Heading No. 40.04 of the Central Excise Tariff as 'waste parings and scrap of rubber' and whether the Modvat credit of duty paid on the inputs going into the manufacture of such cut tyres and tubes in course of manufacture of tyres and tubes would be available under Rule 57D(1) or not. The matter has been examined. It is clarified that ....
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.... of this contention , the ld. Counsel cited and relied upon the decision of the Tribunal in the case of Brooke Bond India Ltd. in which the Tribunal had held :- "4. For the Revenue, it was not controverted that the assessee was agitating before the excise authorities that there should have been a proper adjudication with regard to the dispute of classification. On the facts before us, we are of the considered view that a proper and speaking order should be passed by the Appellate Collector. We are accepting the appellant's plea that letter of 30th June, 1975 addressed by the Dy. Collector cannot be considered as an order of adjudication. We could understand if the Appellant Collector has referred to the assessee's communications filed before the Collector of Central Excise and had come to the conclusion that representations were not correct, but the type of orders which has been passed and which was made the subject matter of revision application before the Government and is, therefore, before us under appeal, cannot be said to be proper." The appellant also cited and relied upon the decision of the Tribunal in the case of Foam Rubber Factory v. CCE. In this case the Tri....