M/S Asahi India Safety Glass Limited v. Advocate

(e) Washing the glass: The glass is firstly washed with hot de-mineralised water. The temperature of the water remains 4 y 4 Safetyglass-Exciseduty WP(C) 6692/2002 •1^is used. is used. Thereafter, between 40-60° C. No chemical is scrubbed by using high density brush rollers running at a speed of 1800 rpm. The water on the glass is then soaked up from the surface by sponge rollers. In case the sponge rollers are not used, water mark/stains will remain become permanent when the glass is taken to furnace for tempering process. Inspection of the glass is not possible unless the water mark/ stains are completely removed from the surface of the glass. Thereafter, the wet glass is dried by blowing hot air at 40-60° C. For the purpose of drying, blowers with heaters are installed inside the dryers. and such stain would on the glass such as bubbles, The glass having (f) Inspection: been cut, beveled and washed are inspected by the trained employees of petitioner with naked eyes against a light source. If the glass contains scratches, white spots, stones, defects paper marks etc are detected. The glass containing any of these defects are segregated. Only glasses which do not contain such defects are passed on to the next stage viz. tempering or lamination, as the case may be. It may be noted that the glass sheets being the input material, have been cut to size and shape and edges beveled. The glass containing defects are destroyed by throwing them into the cullet tank, since the defective glass cannot be marked even as sub-standard/. Seconds glass, keeping in mind the end application in motor vehicles. That is why there is no point tempering/lamination. The defects if any, in the float glass which would ^fect their suitability for use in motor vehicles can only be detected off, processes mandatory grinding and washing which form an integral part of the manufacturing the factory. " the float glass undergoes breaking of cutting, marking, processes undertaken by the petitioner subjecting processes further

According to the petitioner the process indicated herein above being manufacturing process must be followed to obtain the safety glass. These processes form manufacturing process the final product namely safety glass. Since the cut to size pieces of from sheets form one of stages manufacture, according petitioner, manufacturing process commences the moment process of cutting starts and it is only during further process, the defects are detected after washing, 5 '~^ Safetyglass-Exciseduty WP(C)6692/2002 drying and on inspection of the glass. Even if the defects such as scratches and bubbles are found existing then such pieces are not accepted and as such are thrown in a cullet tank and only accepted pieces are forwarded for such process for making the tempered glass and laminated glass. For the reason that the defects such as scratches, bubble, etc. may occur on the float glass supplied, which may not form part of the final cut piece.

In laminated glass, there is combination of two glasses which are laminated together. The first process carried out is bending of two glasses, one inner and another outer according to the fixture required. After bending, the glass is inspected for 7 /Safetyglass-Exciseduty WP^q 6692/2002 curvature and cross curvature. Next, a PVB film is put between the two glasses and de-airing is done by which air is taken out. Thereafter the glass is sent to an oven for heating upto 100 degree Celsius. Finally, the glass is subjected to a process known as auto-calving at a temperature of 135 degrees Celsius and at a pressure of 13 Kg/centimeter square which results in finished laminated glass. I

Show cause notices were issued, inter alia, denying Modvat credit on the defective safety glass ( which were cleared as scrap (cullet) on payment of duty later on) Show cause notice has denied Modvat credit taken by the petitioner during the period from August, 1995 to December, 2000. Show cause notice issued invoking provisions Section llAB and 11 AC of the Central Excise Act,

1944. Ultimately, the petitioner approached Settlement Commission and the application was ' admitted on or about 12.12.2001 and after hearing, the order was made on 21.8.2002 under Section 32F(7) the Central Excise Act, 1944. The Commission made an order as under:- Rs. respectively 3,55,37,917/- "(i) The correct duty liability of the applicant Rs. Rs. in the 3 show cause 26,90,902/- totaling to an amount of Rs. notices 4,03,77,695/-. The applicant had accepted liability of Rs. 56,39,370/- where amount has been paid. shall be The balance amount of Rs. 3,47,38,325/- 21,48,876/-, in question, S 8 Safetyglass-Exciseduty WP(C)6692/2002 paid by the applicant within 30 days of the receipt of this order. applicant (ii) The prosecution for offences under the Act in respect of the case covered by the applications and the SCNs in question. immunity allowed applicant (iii) The payment of penalty leviable under the Act and the Rules made thereunder in respect of the case covered by the applications and SCNs in question. immunity allowed is allowed partial immunity from (iv) The applicant levy of interest. The applicant shall pay interest @10% per annum on the duty amount of Rs. 56,39,370/- from the date the credit was availed till the date of payment of this duty. The interest, liability provisions of Section llAB came into effect under the Act. The applicant shall work out the interest liability by the Jurisdictional Commissioner of Central Excise and thereof within 30 days of shall make the payment the receipt of this order. " from the date accordingly, certified effective

Sub-section (7) of Section 32F of the Central Excise Act, 1944 being relevant, is reproduced hereunder either Commissioner to be heard, of the records the Commissioner of Central Excise (1), and the report, ( Investigation) and the "(7) After examination of Central Excise report received under sub-section any, of the Commissioner of the Settlement Commission under sub-section (6), and after giving an opportunity to the applicant and to having jurisdiction through a representative authorized in this behalf, and after examining such further evidence by it, the as may be placed before it or obtained Settlement Commission mav. in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered bv the application relating to the case not and any other matter covered by the application, but referred to in the report of the Commissioner of Central Excise and Commissioner ( Investigation) under sub-section (1) or sub-section (6)." in person

Learned counsel, therefore, submitted Settlement Commission is entitled to make an order in accordance with the provisions of the Act, and not Safety glass- Excise duty WP(C) 6692/2002 n beyond that. According to the leaned counsel, it is not open for the Settlement Commission to pass an order de hors the provisions of law.

Learned counsel drew our attention to Rule 57A and 57D of the Central Excise Rules 1944 ( hereinafter referred to as the Rules) which are reproduced hereunder:- in this section, in the Official Gazette Rule 57A. Applicability. 1. The provisions of this section shall apply to such finished excisable goods ( hereinafter, referred to as the final as the Central Government may, by products) specify in this notification behalf for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 ( 51 of 1975), as may be specified in the said notification ( hereinafter, this Section, referred to as the specified duty) paid on the goods used in the manufacture of the said final products referred to as the inputs). in this section, ( hereafter, (2) The credit of specified duty allowed under sub- rule (1) shall be utilized towards pajrment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the notification sub-rule (1) and issued under to the provisions of this Section and the subject if any, specified in the conditions and restrictions, said notification.

6. Notwithstanding anjrthing contained in sub-rule (1), the Central Government may, by notification in the Official Gazette, declare the inputs on which the duty of excise paid under Section 3A of the shall be Central Excise Act, 1944 (1 of 1944) deemed equivalent to such amount as may be specified in and allow the credit of such the said notification, duty in respect of the said inputs at such rate or such amount and subject may be specified in the said notification: to have been paid at to such conditions such rate ensure the manufacturer take all Provided inputs reasonable acquired appropriate in the documents accompanying the goods, has been paid under Section 3A of the Central Excise Act, 1944 ( 1 of 1944)." him are duty of excise, on which as indicated ^ ^ arising during the manufacture 57D. Credit of duty not to be denied or varied in certain circumstances.—(1) Credit of specified duty shall not be denied or varied on the ground that part ofthe inputsis containedin anywaste, refuse, or by-product the final product, or that the inputs have become waste during the course of manufacture of the final produce, whether or not such waste or refuse or by-product is exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty or is not specified as a final product under rule 57A."

Learned counsel drew our attention to Rule 57D of the Rules to point out that credit of duty is not to be denied or varied in certain circumstances. It is 11 ^ y Safetyglass-Exciseduty WP(C) 6692/2002 in view of the combined reading of Rule 57A(4) and Rule. 57D(1), the learned counsel submitted that once the float glass is under process output, irrespective of manufacturing product, good or bad or rejected being useless or destroyed during the manufacturing process etc the benefit of Rule 57A cannot be denied.

To understand the question, an illustration can be given of corn thrown in a hot oven for the purpose of obtaining popcorn. Before using the corn, if it is found unfit and rejected and if the duty is to be paid, one has to pay the duty even on such rejected and unfit corn. However, when the remaining corn, other than rejected are thrown in hot oven for getting popcorn the entire quantity may not be popped. Some popcorn may be of better quality- one may call it export quality, some may be of poor quality and some corn because of hardness may not have popped at all, but making popcorn quantity acceptance ( except being rejected as unfit) entire quantity is used for preparing popcorn and it cannot be said that corn which is not popped up were not used for making the popcorn. Whatever quantity after preliminary inspection is used for 12 (y Safetyglass-Exciseduty WP^g6692/2002 making popcorn, one will be entitled to get benefit of the entire quantity irrespective of the results i.e. either popped fully partially or not popped up at all.

It is clear that float glass is eligible input. It was subject to process of manufacturing. After glass has undergone the process of manufacturing if defects are noted then it is not used for final " \ product, namely, lamination toughening. As this defect is brought out only during the process on which duty is paid, required to be considered. In the instant case, at the initial stage the defect is noted in the float glass and therefore no question of Modvat could arise. Only the float glass which undergone process manufacturing has to be considered for Modavt irrespective of the claim lodged with the supplier. The manufacturer has claimed Modavt because he has paid duty on the float glass and has used the same for the manufacturing process, though for one or the other reason, sheet of float glass or part of the sheet could not be used for the final product, is no ground for rejecting the same. If duty is not paid on the goods used as input, one is not entitled to claim Modvat. However, if the duty \ 13 \Safetyglass-Exciseduty [ V WP^g 6692/2002 is paid and the glass is used in the manufacturing process, then one would be entitled. It is clear that no Modvat could be claimed on the float glass, if the same is rejected after opening the wooden box as sheet is found broken or defective and therefore, could not be used as input obtaining final product. Irrespective of obtaining a product is used in the manufacturing process is entitled merely because credit is taken on defective glass used as input is no ground to reject the claim.

On behalf of the respondent, it was submitted that Section 32 is a complete code. Section 31 which falls in Chapter V of the Act pertains to Settlement Commission. Learned counsel for the respondent submitted the order once made by the Settlement Commission would be one under Section 32M. It cannot be reopened. Section 32M reads as under of Settlement "32M"Order to be conclusive.— Every order of settlement passed under sub-section (7) of Section 32F shall be conclusive as to the and no matter covered by matters stated therein such order shall, otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force. " save as

According to the learned counsel, once an order is made, it is not subject to review. According to the 14 ^ Safetyglass-Exciseduty WP(C) 6692/2002 learned counsel for the respondent, the order made under sub-Section (7) of Section 32F may provide the terms or the manner in which the amount shall be paid and the Settlement shall be subsequently Commission that the same has been obtained by or misrepresentation facts. It was submitted by the counsel for the respondent for bringing an end to the matter, the stage of assessment, appeal or appeal before Tribunal are bypassed in view of the special provision. Once the Settlement Commission makes an order that being final, it cannot be interfered even under Article 226 of the Constitution India. On merits, learned counsel respondent submitted that the Commission has committed no in arriving at a conclusion and, therefore, the Court should not interfere in the matter.

Undisputed facts, according to the Commission in paras 11 and 12 are as under:- (i) The main raw material tempered for the manufacture of factory is float glass which is an eligible applicant's input under Rule 57A of the Rules in this case. laminated (ii) inspection to the The defects noticed in the float glass ( input) subjecting of cutting. marking, breaking off, grinding and washing are defects arising at the end of the suppliers of the said float glass and such defects have not been brought about during any of the thereof process (ill) (iv) (v) 15 •n \ glass-Exciseduty WP(C) 6692/2002 processes to which the float glass is subjected to in the applicant's factory. filed a claim for such defective The applicant glass on the respective suppliers and the suppliers reimbursed does not include the element of dutv suffered on such float glass. the applicant glass. reimbursed defective The for which The demand of dutv made bv Revenue confined to the credit taken on defective float has been applicant reimbursed bv the suppliers of such defective glass. The demand of duty does not include breakages process lamination or defects noticed during tempering toughening, Revenue have confirmed the correctness the amount of dutv accepted bv the applicant in their applications. The accepted amount of duty is confined to breakages of float glass ( input) containing it are opened in the factory of the applicant. noticed when the wooden The Commission further observed in para 12 as under: processes the mandatory The claim of the applicant is centered on the "12. contention that the suitability for use of the float glass in the motor vehicles can only be detected after it has undergone cutting, marking, break off, grinding and washing, that the manufacturing process for manufacture of toughened and laminated glass starts as soon as the table and subjected to float glass is out on the float the aforesaid processes and that these processes are mandatory manufacture of their final products. Revenue have disputed this claim of the applicant. The applicant rely on the Production Manual of Ashai Glass Limited, Japan in support of their contention that world-over adopted by the process of manufacture their parent company is identical. " process integral

In para 13, the Commission considered expression "used in the manufacture ""of final products" and "inputs used in or in relation to the manufacture of the final products" that these are to be widely construed as held by the Apex Court. ^ c i •i 4 16 Safetyglass-Exciseduty WP(C)6692/2002 ^ the Commission proceeded by saying Surprisingly, "however the main question to be decided in this case is whether the float glass (input) can be said to be an eligible input of the applicant when it was defective supplier's itself accordingly could not have been used in the manufacture of the finished goods. As observed by us earlier, it is not in dispute that the defects may be in the float glass at the supplier's end and is the reason why the suppliers agreed to reimburse the applicant the value of such defective inputs. This being the case, in our view, the applicant identified such defect at the stage of inspection subjecting the float glass certain processes. Even if these pre-processes considered as integral to manufacture of finished glass, the fact remains that input of float glass could not have been used in or in relation to the manufacture of the final product on account of inherent defect in it. It is also to be noted that these defects are identified through a naked eye against a light source at stage of inspection and this could have been done even after the receipt of the goods in the factory of the applicant and before subjecting them to the various process of cutting, marking, breaking off, W 17 /' A Safety glass- Excise duty WPfCJ 6692/2002 grinding etc. it is also not in dispute that the input float glass does not get rejected on account of any defects developed during any of the pre-processes to which it is subjected to. In view of this position, % reliance placed by the applicant on the following judgments the Tribunal does not appear to be relevant. "

Thus, it is clear that the Commission arrived at a conclusion that after subjecting the float glass to certain process, the defects were identified. The process of manufacturing commences from the initial stage of cutting the float glass of required demanded customer. Even thereafter, following certain procedure, defect is noted in certain piece or pieces made from one sheet. All pieces are not necessarily rejected, may be one, two, or more. Rest are further processed to get the end product. The Commissionerred in holdingthat float glass could not have been used in or in relation to the manufacturer of the final product. There is total non-application of mind. End product is obtained. May be that out of six pieces cut initially all may not have been used for final product on account of defect noticed. It cannot be said that the float i / y I ^ ( K 18 ^ Safetyglass-Exciseduty WP(C) 6692/2002 glass was not used as input. As supplier agreed to reimburse is no ground to say that it was defective materi^ and could not have been used as input.

The Commission in para 14 observed that defective float glass does not get rejected I account of defects developed during any of the processes to which it is subjected to in the factory of the applicant and accordingly the judgment the case of Greaves Ltd v. CCE, Allahabad. 1999fll3) ELT 270 does not help the applicant.

The Commission further observed that the basic question to be asked in the facts of the present case is whether the float glass with built-in defects is at all useful in the manufacturing finished products. While giving answer in negative Rule 57D(4) was referred.

According to the Commission, as the defective float glass in the case of the applicant neither waste refuse arising during manufacture final product nor it has become wastage relation manufacture of their final product. Accordingly, the benefit of Rule 57D (1) of the Rules is not available to the applicant. In the case of #/ Aj ^^ O ^ Z I Safetyglass-Exciseduty WPiP) 6692/2002 applicants the input glass did not become waste in the course of or on account of any of the pre- processes to which it had been subjected to in the factory of the applicant.

However, the Commission has observed as I I A 1986) scratch, standard. annexed in terms according cullet dust ( October, states that bubble off, marking, grinding to the Manual "17. We have also carefully perused the Production Manual of Ashai Glass Limited, Japan Appendix 2 of the application for the first SCN, The Manual no doubt shows that the procession pre-process safety glass production 1 line, automotive and very important process The fixing the shape of final products. intermediate to be carried out inspection after the raw glass is subjected to cutting, breaking is to washing, check, accordance The the 'ground glass is Manual stained with kerosene, etc', grinding scratches, marks etc and therefore it is subjected to the process of washing by the high pressure roller conveyor and brush by the nylon brush of further washing machine. states that the "rejected products may be used as smaller sized glass.

The Commission also observed ( in para 21) that "we are of the view that they made the disclosure a genuine belief interpretation > adopted bv them and there was no ground to suppress any information from the Commission. "

It appears that the Commission has misdirected itself in examining Rule 57A(4) and 57D. When the impugned order made by the Commission is vitiated by more than one misdirection in law then is always open for this Court to exercise jurisdiction orders made f f ^ 2 1 Safety glass- Exciseduty WP(C) 6692/2002 Commission. When the Court Commission's is "contrary to any of the provisions of the Act" or the Rules made thereunder, it becomes the duty of the Court examine the matter and to pass an appropriate order in accordance with law.

The Apex Court in J.K. Cotton Spinning Wvg Mills Co Ltd vs STO, 1997 (91) ELT 34 (SC) pointed expression "in manufacturing goods" should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. In para 8, the Supreme Court further pointed out " where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression "in the manufacture of goods". For instance, in the case of a cotton textile manufacturing concern, cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendared and pressed. All these processes k 22 Safetyglass-Exciseduty WP(C) 669212002 would be regarded as integrated processes included " in the manufacture" of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression "in the manufacture" of cloth in that restricted sense, would rise many anomalies. Raw cotton and ^ machinery for weaving cotton and even vehicles transporting raw and finished goods would qualify Rule 13, spinning machinery, without which the business cannot be carried on. In our judgment. Rule 13 does not justify the importation of restrictions which are not clearly expressed, nor imperatively intended . Goods used as equipment, as tools, as stores as spare parts or as accessories in the manufacture or processing of goods, in mining, and in the generation arid distribution of power need not, \ qualifyfor specialtreatmentunder Section8(1), be ingredients or commodities used in the processes, nor must they be directly and actually needed for "turning out or the creation of goods. " "In our judgment if a process or activity is so integrally related to the ultimate manufacture 23 /)\ •p I Safetyglass-Exciseduty WP(C)6692/2002 so that without that process or activity manufacturer may, even if theoretically possible, by commercially inexpedient goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. "

Even with regard to drawing and photographic materials which may not be used as a material, in the view of the High Court, designing a process distinct from the process manufacture, i.e., of making or fabricating materials by hand, art or machinery, and work into forms convenient for use. The Apex Court pointed out that without a design of the goods sought to be manufactured in a factory which is geared to production of goods of uniform pattern, it would be impossible to attempt manufacture of goods on a commercial scale. The production itself has to be of a set pattern, and deviation from the design prepared would be impermissible. That without the use of drawing and photographic materials, designing of patterns, would, if not impossible, be very difficult, is conceded. The Court pointed out that a bare survey of the diverse to which the goods may be intended to be put in the manufacture or processing of goods. ^ / ^ 24 Sa^y glass-Exciseduty WP(C) 6692/2002 clearly the restricted interpretation placed by the High Court is not warranted.

The Apex Court in the Collector of Central Excise V Raiasthan State Chemical Works, 1991(55) ELT 444 (SCI pointed out in paras 12 and 14 as under relation thus involves in manufacture series of processes. effect of the various processes "Manufacture Process manufacture implies not only the production but the various stages through which the raw material It is is subjected to change by different operations. the cumulative to, manufactured step towards such production would be a process in relation particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible inexpedient, process is one in relation to the manufacture. raw material product the manufacture. Where emerges. Therefore, or commercially subjected

14. In JK Cotton Mills v. S.T. Officer, (1965 1 SCR 900, this Court in construing the expression 'in the manufacture of goods' held thus "But there is no warrant for limiting the meaning of the expression "in the manufacture of goods" to the process of production of goods only. The expression "in the manufacture" takes within its compass, all processes which are directly related to the actual production" The Court further held thus the entire so integrally 'in the manufacture encompass of goods' "The expression process normally carried on by the dealer of converting raw materials into finished goods. Where any particular process ultimate that process production of goods would be manufacture goods required in that commercially process would, fall within the expression 'in the manufacture of goods. " of goods or processing inexpedient, connected with that but in our judgment, The word 'process' has been interpreted by the Apex Court in the aforesaid case in para 16 as under 25 ^ Safetyglass-Exciseduty WP(C) 669212002 a result so as activities to produce is a manufacturing process when it "A process brings out a complete transformation for the whole components commercially different article or a commodity. But, that process itself may consist of several processes which may at every or may not bring about any change intermediate stage. But operations may be so integrally connected that the of a commercially different article. Therefore, any activity or operation which is the essential requirement and is so related for the end result would to the further operations also be a process in or in relation to meinufacture clause in the exemption to attract the word "process" in the notification. aforesaid context notification or activity in relation to manufacture. " in which it appears is the production an operation In Our view, the relevant includes in the 4 /:

In Standard Fireworks Industries v. Collector. 1987 (281 ELT 56(SC) , it was manufacture of fireworks requires cutting of steel wires and the treatment of papers and, therefore, a process for manufacture of goods question. Thus, expression, "in manufacture of goods" takes within its compass all the stages.

Keeping interpretation of Rule 57D and 57A(4), if we once again turn to the finding of the Commission, it is clear that the Commission has misdirected itself. The Commission observed in para 2 that the investigation carried out reveal the applicant was filing claims with the suppliers of float glass in respect of supply of defective/sub standard float glass which had some V 26 ^ glass-Exciseduty WP(C) 6692/2002 inbuilt defects bubbles, stones, scratches, white spots, paper marks, etc. that the claims were filed on the basis of pre-process and quality work sheets maintained by the applicant on daily basis showing such defects in the float glass; acceptance of such claims by the supplier indicated that the defects were inherent during the manufacturing of the float glass and I that such defective float glass were neither useable nor used in the manufacture or in relation to the manufacture of the applicant's finished goods. It is further observed that it appears on this basis the Modvat credit taken by the applicant on such defective float glass was not permissible under the Law. Here again, the Commission misdirected itself in stating that defective float glass was neither usable nor used in the manufacture of the finished goods. As noted earlier, the Commission observed certain process, applicant noticed defect. Therefore, process commenced, rejection of a sheet or a piece or pieces became necessitated. It does not mean that it was not used as an input. Once it is used so, it cannot be said the applicant was not entitled to claim Modvat. It further appeared that the applicant had been receiving consignment 27 Safety glass-Excise duty ^ WPl^g6692/2002 float glass duly packedand packi^^materialwas being disposed off by them as scrap without reversing the credit of duty taken thereon or without discharging the duty leviable on such scrap.

As indicated earlier, when the float glass wooden boxes is received and on opening if the . glass is found broken, the same is rejected. The Commission has misdirected itself in arriving at a conclusion that the glass having defects after having been cut, beveled and washed are inspected and at the goods are segregated. The applicant is not entitled to Modvat credit. It may be that from one sheet six pieces are to be manufactured as safety glass and if in a portion where bubble is noted it does not mean five glass pieces cannot be manufactured. Before lamination the 6th piece which may be defectivewill be left out. From this it cannot be said that the entire sheet of glass was not under process of manufacture. Cutting, marking, breaking, grinding and washing with de- mineralised water, different stages manufacturing process. If the float glass is not found defective the same is cut into pieces of X . ^ 28 /n \/7 Safetyglass-Exciseduty WP^g 6692/2002 (S required sizes and is marked as per requirements of customer. It is thereafter extra portion unwarranted portion or a glass piece is removed by hand or machine. Thereafter edges of glass pieces are grinded. It is thereafter scientifically at certain temperature is washed, mechanically scrubbed, soaked by sponge rollers, passed through furnace for temperature process, y dried through drying blowers with heaters installed inside dryers. Thus undergone certain process of manufacture.

If a sheet is rejected or a piece of sheet is rejected, it does not mean that the sheet was not used in the manufacture of safety glass. It is at juncture again we emphasise that sub-rule (4) of Rule 57A points out that credit is to be allowed on inputs used in the final product and all inputs used in or in relation to the manufacture of the fmal products, whether directly or indirectly and whether contained in the final product or not the department cannot deny credit of specified duty or even can vary on the ground that part of the inputs contained in any waste, refuse or by product arising during the manufacture of final product or when the inputs have become waste 29 ^ \ Safetyglass-Exciseduty WP^g6692/2002 during the course of manufacture of the final product whether or not such waste or refuse or by-product is exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty or not specified as a final product under rule 57A. 31= In substance, when the material i.e. glass sheet is used for the manufacturing process and merely because at a later point of time after the glass has > undergone the process of manufacture, it was found defective and rejected or part of the input being found defective and rejected is no ground in view of the Rule 57A read with Rule 57D to deny the benefit.

In view of what is stated herein above, we find that commission has misdirected itself examining the question.

Considering stage-wise process indicated earlier, it is clear that the process commences with loading of the float glass sheet on the float where cutter is used to cut the glass to size. The process of manufacturing commences stage. Therefore, if at a subsequent stage before the process of lamination, the defect is noted, cannot be said that the process of manufacturing / V i- \ / • f 30 y Safetyglass-Exciseduty WP(C)669212002 did not commence. In view of this, we find substance in the petition and we substance in the submission made by the learned counsel for the revenue that it is not open for the Court to examine the matter. The Apex Court has pointed out in Jvotendrasinhii v. S.I. Tripathi. f19931 201 ITR 611 that finality clause contained in Section 245-1 of the Income-tax Act , 1961 in relation to orders of the Settlement Commission under Section 245D(4), does not and cannot bar the jurisdiction of High Courts under Article 226 of the Constitution of India or the jurisdiction the Supreme Court under Article 32 or under Article 136 and it remains the same i.e. consider whether Settlement Commission is contrary to the provision of the Income-tax Act and if so and whether it has prejudiced the petitioner. This of course, apart I from the ground of bias or malice which constitute an independent and separate category. At page 622 the Court examining the scheme detail has pointed out that "it is true that finality clause contained in Section 245-1 does not and cannot bar the jurisdiction the High Court under Article 226 or the jurisdiction of this Court under Article 32 or Article 136 as the case may i < k 31 ^ ^ Safetyglass-Exciseduty WP^g 6692/2002 be". The Court also examined that the order of Commission is in the nature of package deal and it may not be possible to dissect its order and that the assessee should not be permitted to accept what is favourable to him and reject what is not. It was also argued before the Apex Court that the Commission is not even required or obliged to pass a reasoned order. The provisions contained in the Income-tax Act in so far as Settlement Commission is concerned, are pari materia to the provisions contained in the Central Excise Act.

The Apex Court pointed out that in this context is relevant to note that the principle of natural justice ( audi alteram partem ) incorporated in Section 245D itself. The overall limitation upon the Commission appears to be that it should act in accordance with the provisions the Act. The scope enquiry, whether by the High Court under Article 226 or by the Apex Court under Article 136 is also the same- whether the order of the Commission is contrarv to any of the provisions of the Act and if so. apart from ground of bias, fraud and malice which, of course, constitute a separate independent categorv, prejudiced petitioner/appellant. The Court pointed out , '• 32 i/jl? Safetyglass-Excise duty WP^g 6692/2002 for all the above reasons it was also of the opinion that the only ground upon which the Court can interfere is that the order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the petitioner.

Thus, the Settlement Commission has misdirected itself in considering claims had been accepted by the manufacturer and settled by the supplier of the float glass for arriving at a conclusion float glass was not used as input, though, it is clear from the record that after the manufacturing process commenced, and, before the final product was obtained the part being noticed as not up to the mark for safety glass was rejected. The claim cannot be denied on this ground. i

In result petition allowed, Settlement Commission is directed to consider matter afresh. CHIEF JUSTICE September"yv!) , 2004. ~vsp BADAR DURREZAHMED, J.