TaxTMI 
TaxTMI 
2026 (2) TMI 1006
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....nt to entering into the DSA, such paper is taken out of DSA and reprocessed within the factory. Such reprocessing usually involves pulping the paper and manufacture afresh of paper of same or some other variety. On completion of such reprocessing, the goods so manufactured are taken into DSA stock and cleared in the normal course on payment of applicable duty. (b) In some cases, customers want customized packing. If the customer's requirement of packing is different from the one which is available in stock, such packed goods are taken out of DSA, repacked according to customer's requirements and again entered in the DSA before clearing in the normal course on payment of applicable duty. (c) Where paper has been manufactured for a particular customer but erroneously booked in ERP system in the name of some other customer and the goods are packed with such other customer's name, repacking/reprocessing within the factory is required in order to rectify such mistake. When the goods require reprocessing/repacking for the aforesaid reason subsequent to entering of the goods in the DSA, such goods are taken out of DSA and reprocessed/rectified in the finishing house loca....
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....ity of the same variety was taken out of DSA for reprocessing, in the monthly return, the two quantities appeared as a consolidated figure but the value and duty mentioned in the return were only of the quantity cleared from the factory upon payment of duty, i.e., though the monthly returns included the entire quantity taken out for reprocessing, such quantity did not appear as a separate item wherever the same variety of paper was cleared from the factory upon payment of duty. The appellant intimated the Excise Range Superintendent in writing every month the full details of the different varieties of paper taken out of DSA for re-processing. 4. Consequent to EA 2000 Audit, a Show Cause Notice dated 29.07.2016 was issued to the appellant demanding central excise duty, for the period from October, 2015 to May, 2016, on the allegation that the appellant had removed the manufactured product from DSA without payment of central excise duty, in the guise of "reprocessing" without indicating in the ER-1 Returns, without informing the Department, without issuing any invoices and without obtaining remission under Rule 21 of the Central Excise Rules, 2002. 4.1. The matter was adjudicat....
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.... the goods in the packing in which they were available in stock; or (b) goods manufactured for a particular customer were mistakenly booked in ERP system in the name of some other customer and were packed with such other customer's name. (iii) The appellant had to perforce resort to repacking in such cases and there was nothing unlawful or fanciful about it. It is submitted that if paper cannot be sold because it is not in the packing in which the customer wants it, it cannot be regarded as marketable goods. Providing the customized packing desired by the customer in which he will buy the paper is without a doubt part and parcel of the process of manufacture for making the goods marketable. Similarly, if the appellant has wrongly packed goods manufactured for a particular customer with packing which mentions some other customer's name, it cannot be said that manufacture of such goods is complete, inasmuch as the goods cannot be sold with the wrong packing. Manufacture of marketable goods is complete only after the repacking. It is submitted that the reason which prevailed for dropping the demand in respect of defective/slow/non-moving goods was equally applicable ....
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....ere reprocessed within the factory of production by way of repacking so as to make them marketable. It is submitted that exemption under Notification bearing No. 67/95-CE was squarely available in the instant case. (vii) Rule 8 requires payment of duty and rule 11 requires issue of invoice in respect of goods removed from a factory. Remission under rule 21 has to be obtained when goods are lost or destroyed by natural causes or by unavoidable accident or are unfit for consumption or for marketing. Where the goods are claimed to be unfit for consumption or marketing, the same are required to be destroyed under the supervision of the proper officer in such a manner that they become irretrievable as an excisable commodity. In the instant case, the goods were fit for being used in the factory for repacking and became marketable upon such repacking and there was no question of destroying them. Thus, none of the said provisions were applicable. (viii) The authorities below were wholly unjustified in labelling the established practice and procedure followed by the appellant as per the advice of the department and the contemporaneous reporting and accounting maintained by....
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....ed the name of a party other than the actual buyer and till the goods were packed in a manner acceptable to the customers, they cannot be regarded as marketable; that although the Department was fully aware of all the facts and the practice followed by the appellant in relation to such reprocessing/repacking/rectification, no objections were raised as to the same. 8.1. We find that the very same issue has been examined by this Tribunal in the appellant's own case in ITC Ltd. v. Commissioner of C.Ex., Kolkata-IV [Final Order No. 77664 of 2025 dated 06.11.2025 in Excise Appeal No. 76622 of 2016 - CESTAT, Kolkata], wherein it has been held as under: - "9. We find that the factual details are not in dispute. The only issue before us is about the re-packing of the goods which were already in the RG-1/DSA stage. As per the Learned Sr Counsel, the appellants had taken out the some quantities of paper out of DSA Register and got the same re-packed as per the specific requirement of the customers. After this, once again they were taken back in the DSA records. After this, the goods were cleared from the factory on payment of Excise Duty. From the Show Cause Notice and impugned o....
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.... appellants segregated such defective goods and took it for reprocessing within the plant. Some of the defective goods were made into pipe fittings and the rest became waste and scrap. The waste and scrap were also recycled in the manufacture of finished pipes and the same were cleared on payment of duty. 3. In view of the factual position that the impugned defective goods had been reused within the factory premises of the appellants for production of finished pipes and pipe fittings ultimately, the appellants were clearly eligible from duty-exemption under Notification No. 67/95-C.E., dated 16-3-1995. Accordingly, the impugned Order is set aside and the appeal is allowed with consequential relief to the appellants. 13. We also find that Circular No. 22/71-CX.6 dated 30/10/1971, cited by the Learned Sr. Counsel is applicable in this case. Para 2 of this Circular reads as under: 2. The matter has been examined and it has been decided that the manufacturers will be free to effect transfer of defective or damaged excisable goods from the store-room of their factory for re-processing/re-conditioning within the factory, without payment of duty, after making ne....