1. This is an appeal against the order dated 22-4-1994 passed by the Collector of Central Excise (Appeals), New Delhi. Briefly stated the facts of the case are that the appellants are a 100% Export Oriented Undertaking engaged in the manufacture of polished granite slabs falling under sub-heading 6807.00 of the Central Excise Tariff Act, 1985. The appellants cleared 77 polished granite slabs measuring 353.9374 Sq. Mtrs. for export under bond to Hong Kong from their factory in Udaipur against AR-4 No. 2, dated 21-4-1992. The goods were sealed at the factory premises in a container. It has been claimed that the said container met with an accident near Adalaj container Yard at Ahmedabad and information in this regard was given by the appellants' clearing agent to the Assistant Collector of Customs, C.F.S., Adalaj vide their letter dated 24-4-1992. According to the appellants the Assistant Collector of Customs, Adalaj inspected the contents of the container and recorded the damage suffered by the goods. On an application made by the appellants the container was permitted to be returned to Udaipur. The appellants vide their letter dated 24-4-1992 sought permission of the jurisdictional Assistant Collector at Udaipur to take back the container in the factory under Rule 97A of the Central Excise Rules, 1944. The appellants' claim that the Assistant Collector vide his letter dated 11-5-1992 addressed to the Suptd. Central Excise, Udaipur granted permission under Rule 97A to take back the container in the factory and directed the Suptd. to submit his report regarding the damages suffered by the goods. The appellants also claimed that the contents of the returned containers were inspected by the officer of the Central Excise Div., Udaipur on 12-5-1992 and according to the inspection report dated 12-5-1992 out of 77 slabs of granite measuring 353.9374 Sq. mtrs. cleared for export only 7 slabs measuring 30.7221 Sq. mtrs. were intact and in original condition and 70 slabs were found in broken or partly broken condition. According to the appellants, after reprocessing of the damaged goods only a quantity of 86.0439 Sq.
mtrs. of granite slabs was found to be exportable and the remaining quantity of 267.8935 Sq. mtrs. of granite slabs was not found fit for export on account of the heavy damage. The appellants were served with a notice to show cause as to why duty amounting to Rs. 4,02,826 /- should not be demanded from them under Section 11A(1) of the Central Excises & Salt Act, 1944 on 267.8935 Sq. mtrs. of polished granite slabs cleared for export but not exported. The appellants in their reply to the show cause notice and also during the personal hearing contended that no duty was chargeable since the damaged granite slabs were permitted to be returned back to the factory under Rule 97A of the Central Excise Rules, 1944 and the same were lying in the factory.
However, by order dated 3-1-1994 the Additional Collector held that the duty was recoverable on goods which were permitted to be cleared without payment of duty for the purpose of export but were not actually exported. Being aggrieved by the Additional Collector's order the appellants preferred an appeal before the Collector (Appeals) who by the impugned order confirmed the findings of the Additional Collector.
2. On behalf of the appellants Shri K.K. Anand, learned counsel submitted that the Collector (Appeals) had erred in confirming the duty liability in respect of goods which were cleared for export from the factory but could not be exported. He contended that the fact that goods were allowed to be returned to the factory under Rule 97A implies that the jurisdictional Assistant Collector was satisfied that they were to be remade, refind or subjected to other similar processes in the factory and the conditions laid down in clause (I), (II), (III) of sub-rule (1) of Rule 97A were satisfied in respect of the goods in question. He argued that under these circumstances duty on such goods could not be held as recoverable unless they were disposed off in any manner otherwise then for production of goods of the same class as provided in sub-rule (3) of Rule 97A. The learned advocate reiterated his stand that the goods having been allowed to re-enter the factory under Rule 97A duty, if any, would be recoverable on the goods which may be cleared for home consumption after reprocessing. He, therefore, pleaded that the impugned order may be set aside.
3. On behalf of the respondent Shri K.K. Dutta, Ld. JDR reiterated the findings of the Collector (Appeals) and prayed for the rejection of the appeal.
4. We have examined the record of the case and considered the submissions made on behalf of both sides. The appellants have contended that the finding of the Collector (Appeals) that duty was demandable on quantity 267.8935 Sq. mtrs. of polished granite slabs which were cleared for export under bond without payment of duty but were not exported is erroneous mainly on the ground that the goods in question which were cleared for export allowed to be returned to their factory for reprocessing under Rule 97A and no duty on such returned goods lying in the factory could be demanded unless they were disposed of in any manner otherwise than for the production of the goods for the same class as provided in sub-rule (3) of Rule 97A of the Central Excise Rules, 1944. In support of his contention that the goods were allowed to be returned to the factory under Rule 97A the learned counsel for the appellants has mainly relied on the Assistant Collector's letter dated 11-5-1992 addressed to the Suptd. Central Excise, Udaipur which is reproduced below :- Please refer to your letter C. No. CE-20/Misc/PGL/91/643, dated 1-5-1992 on the above captioned subject and the letter of M/s Pacific Granites Ltd. No. PGL/92/3122, dated 8-5-1992 (copy enclosed).
Goods may be allowed to re-enter in the factory under Rule 97 A of Central Excise Rules, 1944, provided all the condition as per Rule 97A are adhered to strictly.
A detailed report may be sent to the undersigned in this regard, detailing damages of each packages/pieces within 24 hours of such inspection of re-entry of the goods.
From the Assistant Collector's letter dated 11-5-1992 reproduced above it is not clear whether he had passed any final order allowing the return of the goods to the factory under Rule 97A. While directing that the goods may be allowed to re-enter the factory under Rule 97A provided all the condition as per Rule 97A were adhered to strictly, the Assistant Collector had also demanded a detailed report from the Suptd. in this regard and also in regard to the damage suffered in respect of each packet/piece.
5. It is seen that under Rule 97A the goods cleared for export can be allowed to be returned to the factory provided the condition laid down in the said rule are satisfied, one of the important conditions as incorporated in proviso (vi) of sub-rule (1) of Rule 97A is that the value of the goods at the time of return to the factory in the opinion of the Collector should not be less than the amount of the duty originally paid upon them or covered by the bond entered into by the owner under Rule 13 at the time of their Clearance from their factory.
6. Since in the records of the case there is nothing to show that steps were taken to ascertain whether conditions laid down in Rule 97A subject to which the disputed goods cleared for export could be allowed to be returned to the appellants' factory and in particular, whether the condition in proviso (vi) of sub-rule (1) of the said rule was satisfied. It is, therefore, not possible for us to take a definite view in regard to the appellants' claim that the goods in question were allowed to be returned to the factory under Rule 97A. Since the orders passed by the lower authorities do not throw any light on the question whether as claimed by the appellants re-entry of the disputed goods into the factory was allowed under Rule 97A by the competent authority after satisfying himself that all the required conditions were satisfied, the said orders have to be deemed as having been passed without proper application of mind. We, therefore, set aside the impugned order and remand the matter to the original authority for re-adjudication in accordance with law. We direct that the adjudicating authority to grant a personal hearing to the appellants and keep in view the observations made by us in this order.