1. These appeals arise out of the Order-in-Appeal bearing Nos. 2452/79 to 2463/79, dated 28-12-1979 passed by the Collector of Central Excise (Appeals) Bombay.
2. The brief facts necessary for the disposal of these appeals may be stated as under: The appellants are the manufacturer of P or P Medicines falling under Tariff Item 14-E of Central Excises & Salt Act, 1944 (to be hereinafter referred to as 'the Act'). During the period from June, 1974 to December, 1974 the appellants received back in their factory certain quantities of their products for the purposes of re-processing. After re-processing they cleared the goods on payment of Central Excise duty. Subsequently, the appellants claimed refund of duty originally paid in respect of the goods which were brought to their factory for re-processing and which were subsequently cleared on payment of duty. In all they made 12 claims. The Assistant Collector of Central Excise by 12 separate orders disallowed portion of their claims holding that the amount of duty involved on the processing loss occurred while reprocessing of duty paid goods returned to the factory, is inadmissible for claiming refund under Rule 173-L of the Central Excise Rules, 1944 (to be hereinafter referred to as 'the Rules'). Feeling aggrieved the appellants preferred 12 appeals before the Collector (Appeals). The Collector (Appeals) consolidated all the 12 appeals and passed a common order rejecting all the 12 appeals. The reasons for rejection of the appeals are set out in paragraph 9 of the order which reads: 'There is no dispute of the fact that the appellants complied with the provisions of Rule 173-L.U) and (2) of the CE Rules, 1944. In fact the refunds were partially allowed by the lower authority as the appellants complied with the above provisions. In respect of reprocessing losses which have occurred during the process of making the sub-standard drugs fit for human use it has to be stated that the Central Excise Rules do not provide for such a situation where a refund of duty should be given on reprocessing losses. The reprocessing losses, which have occurred in the instant cases are genuine and this fact has not been disputed by the lower authority.
However, in the absence of statutory provisions for granting refund of duty on such processing losses, the lower authority rejected the amount of duty involved on the reprocessing under Sub-rule 3(iii) of Rule 173-L in as much as that much quantity was not properly accounted for by the appellants.' 3. Against this order of the Collector (Appeals) the appellants preferred only one revision application before the Government of India which statu-torily stood transferred to the Tribunal for being heard as an appeal and came to be numbered as Appeal No. 57/80. As there were 12 appeals before the Collector (Appeals) the Tribunal called upon the appellants either to restrict their appeal to any of their claim in the 12 appeals preferred before the Collector (Appeals) or to file 11 supplementary appeals. The appellants, however, filed 12 supplementary appeals and they came to be numbered as Appeal Nos. 151/84 to 162/84.
As the revision application which is numbered as 57/80 is also considered the last of the appeal, namely, Appeal No. 162/84 shall have to be treated as redundant.
4. Shri A.J. Sheth, General Manager of the appellants vehemently contended that the authorities below have committed an error in law in disallowing part of their claim. Both the authorities have recorded a finding that the appellants had complied with the provisions of Rule 173-L of the Rules. The part of the claim had been rejected by the Assistant Collector on the ground that the apellants did not account for the quantity lost during reprocessing. The Appellate Collector upheld the order of the Assistant Collector solely on the ground that the rules did not provide for ordering refund in respect of the loss caused during reprocessing. The reasonings of both the authorities according to Shri Sheth are totally erroneous. Shri Sheth contended that if once the appellants establish that they had complied with the provisions of Rule 173-L then no portion of their refund claim can be disallowed. He, therefore, prayed that the orders passed by the authorities below may be set aside and the relief claimed by them may be granted.
5. Shri N.K. Pattekar, the departmental representative supported the orders passed by the authorities below and contended that in respect of the goods that were lost during' reprocessing, it cannot be said that the appellants had accounted for, and therefore, the authorities below are right and also justified in disallowing a portion of their refund claim.
6. I have carefully considered the submissions made on both sides and also perused the records of the case.
7. The question that appropriately arise in this appeal are (1) whether the appellants are entitled for refund of full amount of Central Excise duty paid at the time of first clearance of goods for home consumption and (2) whether the Assistant Collector and the Appellate Collector were right and justified in disallowing a part of their refund claim.
Rule 173-L of the Rules authorises the Collector to grant refund of the duty paid or manufactured excisable goods issued for home consumption from a factory, which are returned to the same or any other factory for being remade, refined, reconditioned or supply to any other similar process in the factory. The conditions to be fulfilled by the manufacturer for claiming refund of duty are set out in the two proviso to Sub-rule (1) of Rule 173-L and also in Sub-rule (2) of Rule 173-L.
When refund cannot be paid is provided under Sub-rule (3).
Inadmissibility of the refund in respect of the duty paid goods is provided in Clause (i) to (iv) (at the relevant time) of Sub-rule (3).
8. The Assistant Collector as well as the Appellate Collector had held that the appellants had complied with the provisions of Rule 173-L (1) and (2) of the Rules. They had not raised any objection for payment of duty. In other words the appellants could be said to have complied with the conditions laid down in Sub-rule(3) in so far as it relates to the payment of refund. As a matter of fact, major portion of the refund claim had been allowed by the Assistant Collector. The Assistant Collector, however, held that there was loss of goods during reprocessing. So while ordering refund, he deducted the duty payable on the processing loss. His reasoning was that the amount of duty involved on the processing loss incurred while reprocessing of duty paid goods returned to the factory is not admissible for claiming refund under Rule 173-L of the rules. The Collector (Appeals) though referred to this finding of the Assistant Collector did not express his own view as to the correctness or otherwise. He, however, held that the rules are silent as to the grant of refund in respect of the goods lost during reprocessing.
9. The appellants as stated earlier had contended that the Assistant Collector as well as the Collector (Appeals) have wrongly interpreted the Rule 173-L. Since it is not disputed that the appellants had complied with the provisions of Rule 173-L (1) and (2), it' is not necessary to set out Sub-rules (1) and (2) of Rule 173-L. Sub-rule (3) reads as under: 'No refund under Sub-rule (1) shall be paid until the processes mentioned therein have been completed and on account under Sub-rule (2) having been rendered to the satisfaction of the Collector within six months of the return of the goods to the factory. No refund shall be admissible in respect of the duty paid:- (i) in respect of opened packages containing goods with concessional rates of duty or partial exemption for the small or cottage section, as set forth in the First Schedule to the Act, or by a notification issued under Rule 8.
(ii) if the amount of refund payable on the goods is less than rupees fifty; (iii)on goods which are disposed of in any manner other than for production of goods of the same class; (iv)on the manufactured tobacco from which cigars, cheroots and cigarettes so returned to the factory have been produced.' 10. Thus it is seen that refund becomes inadmissible only if the claim falls under any or all of the above clauses. Neither the Assistant Collector nor the Collector (Appeals) had recorded a finding that the portion of the refund claim became inadmissible because the claim falls under any or all of the clauses, of Sub-rule (3). Shri Pattekar, learned departmental representative had augued that the finding of the Assistant Collector should be construed, as the appellants' having not accounted for the goods lost during reprocessing, and therefore, their refund claim to the extent of goods lost during reprocessing fell within the ambit of clause (iii) of Sub-rule (3). There appears no merit in this contention of Shri Pattekar. Clause (iii) of Sub-rule (3) does not contemplate of accounting for the goods received. Under this clause refund becomes inadmissible if the goods received for reprocessing are disposed of in any manner other than for production of goods for the same class. Neither the Assistant Collector not the Collector (Appeals) had recorded a finding that the goods received back in the factory of the appellants for reprocessing were disposed of in any manner other than for production of goods of the same class. In the absence of such a finding there is no scope to contend that the refund claim of the appellants fell within the ambit of Sub-clause (iii) of Sub-rule (3). The maintenance of account is provided under Sub-rule (2) of Rule 173-L. The account required to be maintained under that sub-rule is of the returned goods and the processes to which they are subjected after their return to the factory. There is no complaint that the appellants did not render the accounts of the returned goods to the satisfaction of the Collector within the specified period. On the other hand the Collector (Appeals) in his order had stated that the appellants had complied with Sub-rules (1) and (2) of Rule 173-L.
11. There appears no legal basis for the finding of the Assistant Collector. Rule 173-L nowhere lays down that while refunding duty in respect of the goods returned for reprocessing, there shall be a deduction of duty payable on the goods lost during reprocessing. In the said circumstances the finding of the Assistant Collector that the amount of duty involved on the processing loss incurred while reprocessing of duty paid goods returned to the factory is not admissible for claiming refund under Rule 173-L of Central Excise Rules is legally untenable.
12. The Assistant Collector and the Collector (Appeals) did not attribute the loss due to diversification of the returned goods.
Therefore, the loss if any, could be the natural consequence of reprocessing. The rules did not provide that while granting refund the loss that had occurred during reprocessing shall be reckoned and that duty payable on the goods so lost shall be deducted from the refund claim. In the absence of such a provision the authorities below were totally not justified in disallowing the part of the claim. It may be pointed out here that the Collector (Appeals) had accepted the contention of the appellants that the losses that had occurred were purely manufacturing losses which were inevitable and beyond the appellants control. The finding of the Collector (Appeals) that the rules are silent with regard to the grant of refund in respect of the goods lost during reprocessing is erroneous. Rule 173-L is a complete code in the matter of refund of duty on goods returned to the factory.
When refund is admissible and when it is. not admissible are laid down in the said rule. The rule is explicit and unambiguous. It says that the Collector may grant refund if the manufacturer claiming refund satisfies the Collector the conditions laid down in that rule.
13. In what circumstances the refund is inadmissible is set out in clauses (i) to (iv) (at the relevant time) of Sub-rule (3) of Rule 173-L. Thus, both positive and negative aspects had been provided in the rules. The rules in my opinion is more elequent and it would be incorrect to state that rule is silent.
14. After careful consideration of all the aspects, I allow these appeals and set aside the orders passed by the authorities below and direct the Central Excise authorities to grant consequential relief to the appellants.