P.C. Jain, Member (T)

1. Short question involved in all these six appeals is interpretation of Rule 173-H. Brief facts of the case are as follows :-

The respondent company at Rishikesh manufactures glass and glass-wares and their major production consists of vials which are supplied by them to M/s. IDPL Rishikesh, manufacturer of drugs and medicines. M/s. IDPL insist on a very high standard of quality and goods despatched to them which are found by them below standard for packing their medicines are not accepted by them and this necessitated return of duty paid goods to the respondent company's factory. At the request of the respondent company vide their letter dated 22/30.4.1976 addressed to the Collector of Customs and Central Excise, Sarvodaya Nagar, Kanpur, permission was granted to the respondent company that subject to the condition and procedure outlined in Rule 173-H of Central Excise Rules, 1944 and Collector's Notification No. 5-CE/70. dated 7.3.1970 to bring the defective duty paid vials rejected by M/s. IDPL and take out equivalent number of vials without payment of duty in terms of Rule 173-H. In order to appreciate the controversy in the proper perspective it is appropriate to extract at this stage some of the relevant portions from the respondent company's letter dated 22/30.4.1976 :-

"To summarise the position we wish to submit as under :-

(1) Upto December 1975, we have made glass vials only and our entire production has been supplied to the Antibiotics Plant of the IDPL This plant is a wholly owned unit of the Govt. of India.

(2) as per the terms of our contract, Central Excise and any other Government levies are to be borne by them.

(3) We are supplying vials, duly packed in cardboard boxes, - each box containing 1000 X 7.5 cc vials. 15 c.c. vials are packed in cardboard boxes containing 800 Nos.

(4) the Antibiotics Plant of the Indian Drugs Pharmaceuticals Ltd. Virbhadra-Rishikesh, when using these vials (for packing life saving drugs), tear the cardboard boxes and feed the vial into their automatic machines. At this stage If they find that any vials do not conform to their specifications, the same are rejected.

(5) as per the Excise Rules, an excisable commodity if rejected after payment of excise duty and after it has been cleared from the premises of manufacturer, is to be returned in the original packing to the manufacturer, who can then re-make it and supply it once again without payment of excise duty, by following the procedure laid down in the Excise Rules.

(6) as explained above, it is not possible for the IDPL to return the rejected glass vials in the original packing, as it is torn at the time vials are fed into their automatic machines. from a packing box containing 1000 vials, only a few vials are rejected; and this rejection is noticed only after the packing boxes are opened.

(7) Uptil now rejected vials have been returned by the IDPL, duly packed in gunny bags. However, in case your department insists, the maximum that the Antibiotics Plant can do is to return the rejected glass vials, duly packed in boxes, similar to the ones in which we supply vials to them. They cannot return the rejected vials in original packing.

(8) Rejected vials are not our raw material.

(9) the only method of re-making rejected glass vials is by remelting the same and repeating the process as in the case of making fresh vials.

REQUEST: in view of the foregoing we have to request as under :-

(1) kindly permit us to take from IDPL vials rejected by them during 100% inspection, duly packed in gunny bags, - the number of vials thus returned to be calculated on weight basis as indicated above.

(2) Kindly permit us to replace these vials without paying excise duty, after we have re-made the same, as indicated above.

(3) in case this is not acceptable, kindly permit us to claim refund of excise duty on the rejected vials, which we have taken back (and replaced) from the Antibiotics Plants of the Indian Drugs Pharmaceuticals Ltd.,