Per M.V. Ravindran : These two appeals are directed against Order-in-Original No. 17/COMMR/05-06 dt. 31.7.2005 & Order-in-Appeal No. AT/526/M.III/2006 dt. 23.8.2006 since the issue involved in both the appeals are same they are being disposed off by a common order.

2. The relevant facts that arise for consideration are appellant is engaged in the manufacture of Aluminium Foils as per specification given by the customers. The appellants cleared the said Aluminium Foils on payment of appropriate duties to their customers. The customers of the appellant rejected few consignments for being off-specification. These goods are brought back by the appellant into the factory under the provisions of Rule 16 of Central Excise Rules, 2002. After the inspection of such rejected goods, appellant cleared those goods, which conformed to the specification of the customers on payment of duty and cleared the balance as waste and scrap. The appellant availed Cenvat Credit as per provisions of Rule 16 of Central Excise Rules, 2002 when they received the goods back from their customers and while clearing the goods second time to their customers they paid the duty on such clearances. On the balance goods, which are waste or scrap, the appellant paid appropriate duty as waste and scrap. Show cause notice was issued to the appellant directing them the show cause as to why the excess amount of credit availed by them on the rejected goods and cleared as waste/scrap subsequently, be not demanded on the ground that there is no manufacture of the goods. Appellant resisted the show cause notice on the ground that they carry out the process of manufacture of unwinding rolls received back by the customers, inspecting them for the specification not matching and subsequently cutting them and re-rolling them, in itself would amount to manufacture and they are not required to reverse any amount as indicated in the show cause notice. The adjudicating authority did not accept the contentions of the appellant and confirmed the demand and also imposed penalties. On an appeal, Commissioner(Appeals) also concurred with the views of the adjudicating authority on the very same ground.

3. The Ld. Advocate appearing on behalf of the appellants submits that they have complied with the provisions of Rule 16 in much that the process to which the rejected goods Aluminium Foil are put to, would amount to manufacture. It is his submission that the waste and scrap which gets generated on such process is nothing but a process of manufacture and hence there is no justification for the demand of the duty. He further submits that the clearances of the goods when initially took place were not of marketable goods and no duty was payable. The scrapping of finished goods received back from thee customers end are duty paid and hence the credit availed by them would be correct. It was submitted that, since duty was not payable on non-marketable goods the availment of credit on re-finished goods is within the law. He relies upon the decisions of the Tribunal in the case of DSM Anti-Infective India (P) Ltd. Vs. Commissioner of Central Excise, Chandigarh as reported at 2004 (60) RLT 11 (CESTAT-Del.)=2004 (165) ELT 69 (Tri.-Del.) for the proposition that if the goods at customers end found to be defective, meaning thereby that the product in question was not marketable and if it is so no duty is payable. The Ld. SDR reiterates the findings of the lower authorities.

4. Considered the submission made at length by both sides and perused the records. It is undisputed that when the appellant cleared their final products, at the first instance, they did so, after concluding that their products were matching the specification as given by their customers. The provisions of Central Excise Law are very clear on this aspect i.e. duty is payable on removal of dutiable goods. It is settled law that Central Excise duty is payable on manufacture of the final products, but discharge of duty liability is def