JUDGMENT K.S. Jhaveri, J. - In all these appeals, the common questions of law and facts are involved, therefore they are decided by this common judgment. 2. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal preferred by the assessee. 3. This Court while admitting the appeals on different dates has framed the following substantial question of law :- "Whether the Tribunal is right in law in allowing Cenvat Credit of the duty paid in respect of imported inputs/components which were found faulty during testing process prior to the issuance of the same into the manufacturing process of final product and the same inputs were re-exported to the overseas supplier without reversing the Cenvat Credit availed earlier when as per provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, when inputs on which Cenvat Credit has been taken are removed as such from the factory premises by the manufacturer of final product, the manufacturer is required to pay amount equal to the cenvat credit availed in respect of such inputs?" 4. Counsel for the appellant has taken us to the para 10 of the order of the Assessing Officer which reads as under :- "To further investigate the nature of such re-exports so as to verify whether the benefit under the above procedure is available or not, the officers of the division visited M/s. Ericsson India Pvt. Ltd., on 30-11-2009. During the visit it was found that the process of manufacture of finished goods in M/s. Ericsson India Pvt. Ltd., is assembly of the components. The components were issued from the store room to the production floor where assembly of the components/finished products takes place. It was stated by the assessee that the product is tested at the production floor. During testing it was known that a particular component is faulty and not functioning. Therefore a material return form is prepared in the production floor containing the name of input, what is faulty and the name of the employer who conducted the test and detected the fault. The MRF (Material Return form) also contained the information like product category, Article Code, Function description, Quality, S. No. and reason of rejection. Therefore a material return form is prepared in the production floor containing the name of input, what is faulty and the name of the employer who conducted the test and detected the fault. The MRF (Material Return form) also contained the information like product category, Article Code, Function description, Quality, S. No. and reason of rejection. On the basis of MRF they filed the claim online to Ericsson Sweden and other suppliers and when the claim is accepted by them these faulty components were re-exported to the supplier. It was also found that either they received credit note in respect of faulty components after acceptance of claim by the M/s. Ericsson Sweden or they received free replacement of the re-exported faulty components. During the visit, officers of this division on 30-11-2009 it was also detected that apart from the re-export of the faulty components the unit also re-exported the fresh components without being issued to the assembly floor. During the visit the invoice Nos. 237, 238 both dated 5-12-2007 invoice No. 56, dated 30-7-2009 and invoice No. 99, dated 23-8-2009, etc., were pointed out to them wherein the imported components which were imported under concessional rate of duty under Notification No. 24/2005-Cus., dated 1-3-2005 as amended, were re-exported as such and were not faulty and no information in this regard was provided to the department during their visit dated 31-8-2009 nor in their letter vide dated 19-11-2009. Copy of supply contract between Ericsson India Pvt. Ltd., and Ericsson AB for the supply of "Components for manufacture of Radio Base Station was also collected along with Copy of the purchase order in respect of such re-export were also collected from them. As these components were re-exported as such, therefore, assessee were directed by the visiting Central Excise Officers to deposit the differential customs duty along with interest in respect of the re-export of the such fresh components during their visit on 30-11-2009. On being pointed out during the visit on 30-11-2009, the assessee in principle agreed to deposit the differential customs duty along with interest of such exports. The assessee thereafter deposited the differential customs duty along with interest amounting to Rs. 1,07,24,689/- vide TR-6 on 7-12-2009. On being pointed out during the visit on 30-11-2009, the assessee in principle agreed to deposit the differential customs duty along with interest of such exports. The assessee thereafter deposited the differential customs duty along with interest amounting to Rs. 1,07,24,689/- vide TR-6 on 7-12-2009. The assessee has submitted the details of re-exported goods during the periods 2005-2006 to 2009-2010 (Till 31-7-2009) vide their letter dated 8-12-2009 and also submitted the copy of TR-6 dated 7-12-2009 intimating the deposit of Rs. 10,724,689/- as a differential customs duty along with the interest in respect of re-export of the components which were received under concessional rate of duty vide Notification No. 24/2005-Cus., dated 1-3-2005 as amended, and were not faulty." 5. Counsel for the appellant has further contended that : A. That the order passed by the Tribunal is illegal and is unsustainable in the eyes of law, and therefore, deserves to be set aside by this Hon''ble Court. It is submitted that the Hon''ble Tribunal has erred by taking the stand that inputs (components) issued from the store room for testing purposes was a part of manufacturing process. Whereas in fact, the assessee issued inputs (components) only for testing purpose to ascertain as to whether the same components are fit for further use or not, if the components are found fit in testing, then the components would be sent to manufacturing process otherwise the said components would be treated as defective or damaged and returned to the supplier. It is pertinent that testing of inputs (components) or raw material prior to its use cannot be a part of manufacturing process though testing of finished product can be a part of the manufacturing process. In other words, the inputs (components) which were found defective during testing were meant for return to the supplier, the same defective inputs cannot be said to be issued in the assembly line of manufacturing process of final product. B. That on going through the facts as mentioned in Para 13 of OIO No. 58/2012 (CE) - Commr., dated 28-9-2012, pertaining to the earlier appeals decided by the Tribunal vide its Final Order Nos. B. That on going through the facts as mentioned in Para 13 of OIO No. 58/2012 (CE) - Commr., dated 28-9-2012, pertaining to the earlier appeals decided by the Tribunal vide its Final Order Nos. A/53407-53408/2014, dated 21-8-2014 (which are reproduced hereunder for ready reference), it transpires that supplier was under obligation to replace only those inputs which contain manufacturing defects and therefore it is obvious that inputs damaged during the process of manufacture cannot be returned meaning thereby that the inputs in question were returned before putting them into use for manufacture of final products. "Para 13 of O-I-O No. 58/2012 (CE) - Commr., dated 28-9-2012 : "The above referred facts indicated that the supplier gives the warranty or replacement only in respect of those components/spare parts which has been sent to the M/s. Ericsson India Pvt. Ltd., and had any manufacturing defect/technical defects. This also means that these components could not be used in the manufacture of finished products as they had manufacturing defect at the first place itself and there was no process of testing of components/spare parts before being issued, to the assembly line at the assessee''s premises. Once the assessee came to know that a particular component was defective and the defect was of manufacturing nature then M/s. Ericsson India Pvt. Ltd., lodged a complaint with the supplier of the component." C. That Tribunal further erred in considering that credit is not required to be reversed, when inputs originally imported were subsequently re-exported on being detected as damaged or faulty. The learned CESTAT considered that removal of inputs ''as such'' means removal of the inputs before putting them to use and only in those situation, the assessee is liable to reverse the credit which is not the case of the appellants. The Tribunal erred in concluding that the inputs cannot be said to be cleared as such so as to attract Cenvat reversal. D. That CESTAT appears to have taken a contradictory stand with regard to the status of inputs, as on one hand the impugned defective inputs have been treated not cleared "as such" and thus Rule 3(5) of Cenvat Credit Rules, 2004 (for reversal of Cenvat credit) is not attracted whereas while extending the benefit available to exported goods the learned Tribunal considered them as cleared "as such". E. That the impugned order concluding that testing of inputs in question was done either during the manufacturing process or after the assembling of the components and therefore the findings that inputs were found defective or damaged prior to their issuance from the store is factually incorrect. F. That CESTAT order is against the very principle of scheme of CENVAT Credit which allows the credit only in respect of inputs used in or in relation to manufacture of final products as in this case neither the inputs gone into the manufacturing of final products nor the Cost of the same formed part of the final products (as the same were returned to the supplier on cost basis/replacement basis). G. Cummins India Ltd. v. CCE Pune-III, 2007 (219) E.L.T. 911 (Mum.) . [Para 8 Page No. 6, S. No. (1) of CESTAT''s order]. Ratio : Meaning of expression "as such" would be that capital goods are removed without putting them to use. This appears to be in Revenue''s favour as in the instant case before putting the inputs for manufacture of final products the defects were noticed during inspection : therefore, it is a case of removal of input as such 2. Shree Rajasthan Syntex Ltd. v. CCE, Jaipur - 2012 (280) E.L.T. 470 (Del.) [Para 8 at Page 6, S. No. (2) of (sic) order]. Ratio : Removal of old used capital goods not treatable as removal of capital goods "as such." Distinguishable on the facts as instant case is neither related to removal of capital goods nor removal of inputs after putting into use. 3. Shree Rajasthan Syntex Ltd. v. CCE, Jaipur - 2012 (282) E.L.T. 550 (Del.) [Para 8 at Page 6 S. No. (3) of (sic) order]. Ratio : Removal ''as such'' meaning removal of goods from premises after availing credit without putting into use or usage for small duration. This appears to be in favour of Revenue as in the instant case the defects were noticed during inspection of inputs i.e. before putting the inputs in manufacturing process for manufacture of final products, therefore, it is a case of removal of input as such. That in view of the above the judgments relied upon by the CESTAT in favour of the assessee have no bearing to the facts of the present matter and the impugned order deserves to be set aside on this very ground alone. That in view of the above the judgments relied upon by the CESTAT in favour of the assessee have no bearing to the facts of the present matter and the impugned order deserves to be set aside on this very ground alone. L. That in view of the above, it appears that the ratio of various case laws relied upon by the CESTAT, in its earlier decision are not applicable to the present case also and the findings of the decision passed in the earlier cases of the assessee unit and made applicable to this case also are not correct. It is submitted that with regard to the issue for allowing the assessee''s claim for duty drawback by the customs authorities, on the components which were re-exported (in respect of which the duty demand for Rs. 94,29,117/- was confirmed), the contention of the Hon''ble Tribunal does not appear to be correct inasmuch as that those ''components'' do not fall under the ambit of the provision of Section 75 of the Customs Act, 1962 as the said ''components'' were the "surplus" out of the imported material on which no process was undertaken by the assessee unit and the same were re-exported as such to the supplier Co., which is the main Co. of the assessee unit, for which no payment was made by the recipient Co. to the supplier Co. For the sake of convenience, the provisions of Section 75 of the Customs Act, 1962 are being re-produced hereunder : "Section 75. Drawback on imported materials used in the manufacture of goods which are exported. - (1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under section 51 by the proper officer, or being goods entered for export by post under section 82 and in respect of which an order permitting clearance for exportation has been made by the proper officer, a drawback should be allowed of duties of customs chargeable under this Act on any imported materials of a class of description used in the manufacture or processing of such goods or carrying out any operation on such goods, the Central Govt. may, by notification in the Official Gazette, direct that drawback shall be allowed in respect of such goods in accordance with and subject to the rule made under sub-section (2)." 6. He contended that the Tribunal has seriously committed an error in relying on the decision of the Delhi High Court in the case of Asahi India Safety Glass Ltd. v. Union of India reported in 2005 (180) E.L.T. 5 (Del.) wherein it has been held as under :- "29. As indicated earlier, when the float glass in 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 that stage 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 that five glass pieces cannot be manufactured. Before lamination the 6th piece which may be defective will 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, are different stages of manufacturing process. If the float glass is not found defective the same is cut into pieces of required sizes and is marked as per requirements of customer. It is thereafter extra portion or 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 glass piece is washed, mechanically scrubbed, soaked by sponge rollers, passed through furnace for temperature process, dried through drying blowers with heaters installed inside the dryers. Thus input has undergone certain process of manufacture. 30. 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. Thus input has undergone certain process of manufacture. 30. 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 this 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 final 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 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. 33. Considering the stage-wise process indicated earlier, it is clear that the process commences with loading of the float glass sheet on the float table where cutter is used to cut the glass to size. The process of manufacturing commences at this stage. Therefore, if at a subsequent stage before the process of lamination, the defect is noted, it cannot be said that the process of manufacturing did not commence. In view of this, we find substance in the petition and we find no 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 Jyotendrasinhji v. S.I. Tripathi, (1993) 201 ITR 611 that finality clause contained in Section 245-I 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 of the Supreme Court under Article 32 or under Article 136 and it remains the same i.e. to consider whether the order of 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 from the ground of bias or malice which constitute an independent and separate category. At page 622 the Court after examining the scheme in detail has pointed out that "it is true that finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this Court under Article 32 or Article 136 as the case may 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 assessed 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. 34. The Apex Court pointed out that in this context it is relevant to note that the principle of natural justice (audi alteram partem) has been incorporated in Section 245D itself. The sole overall limitation upon the Commission thus appears to be that it should act in accordance with the provisions of the Act. The scope of 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 contrary 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 and independent category, has it prejudiced the petitioner/appellant. The Court pointed out that 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. 35. The Court pointed out that 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. 35. Thus, it is very clear that the Settlement Commission has misdirected itself in considering that the claims had been accepted by the manufacturer and settled by the supplier of the float glass for arriving at a conclusion that the 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. 7. It is contended that the Supreme Court in Union of India v. Asahi India Safety Glass Ltd. - (2015) 11 Supreme Court Cases 451 : 2015 (320) E.L.T. 179 (S.C.) : 2017 (50) S.T.R. 122 (S.C.) while confirming the order has observed in para 7 which reads as under :- "7. In the instant appeal preferred by the Department against the aforesaid order, the main argument of the Department is that once the Settlement Commission had passed the orders under Section 32E of the Act, the High Court had no jurisdiction to tinker with the same, in exercise of its extraordinary jurisdiction under Article 226 of the Constitution. It is the submission of the Department, as advanced by Mr. Yashank Adhyaru that the High Court has exceeded its limits of jurisdiction by examining the matter afresh as if it was sitting in appeal over the order of the Settlement Commission, which was clearly impermissible." 8. Counsel for the appellant therefore contended that the view taken by the tribunal is required to be reversed inasmuch the ericsson company has not used the product and without using it re-exported, thus they could not have claimed the double benefit. 9. Counsel for the respondent has relied on the judgment rendered by the Supreme Court in the case of Union of India v. Asahi India Safety Glass Ltd. (2015) 11 Supreme Court Cases 451 : 2015 (320) E.L.T. 179 (S.C.) : 2017 (50) S.T.R. 122 (S.C.) wherein the Supreme Court has observed as under :- "12. 9. Counsel for the respondent has relied on the judgment rendered by the Supreme Court in the case of Union of India v. Asahi India Safety Glass Ltd. (2015) 11 Supreme Court Cases 451 : 2015 (320) E.L.T. 179 (S.C.) : 2017 (50) S.T.R. 122 (S.C.) wherein the Supreme Court has observed as under :- "12. On that basis the High Court has concluded that the Commission committed an error by applying the wrong principle in law, by treating even the float glass used for manufacture, that is, after the manufacturing process had commenced, to be a wasted input and came to an erroneous conclusion that MODVAT could not be claimed in respect of that part of a particular float glass sheet. In forming this opinion the High Court relied upon the judgment of this Court in CCE v. Rajasthan State Chemical Works , wherein this Court is to when the manufacturing process starts. The final portion from the said judgment which is quoted by the High Court, is reproduced for proper understanding of the matter : "13. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. 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 impossible or commercially inexpedient, that process is one in relation to the manufacture." 13. The High Court has also relied upon two other judgments of this Court viz. J.K. Cotton Spg. and Wvg. Mills Co. Ltd. v. STO and Standard Fireworks Industries v. CCE laying down the same proposition as noted in Rajasthan State Chemical Works. In the process, the High Court has also interpreted Rule 57D and Rule 57A(4) of the Rules. It would be pertinent to mention here that the aforesaid legal position, as stated by the High Court, could not be dislodged by the learned Senior Counsel for the appellant. 14. In the process, the High Court has also interpreted Rule 57D and Rule 57A(4) of the Rules. It would be pertinent to mention here that the aforesaid legal position, as stated by the High Court, could not be dislodged by the learned Senior Counsel for the appellant. 14. From the aforesaid it becomes clear that the High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. This, according to us, was well within the powers of the High Court while exercising its jurisdiction under Article 226 of the Constitution. Such remand of the High Court has been held permissible in Jyotendrasinhji v. S.I. Tripathi which was also concerning the powers of the Settlement Commission, albeit under Section 245D(4) of the Income-tax Act. The principle of law remains the same and can be applied in case of orders passed by the Settlement Commission under the Central Excise Act as well." 10. Counsel for the respondent has relied on the following judgments :- 1. Asahi India Safety Glass Ltd. v. Union of India - 2005 (180) E.L.T. 5 (Del.) 2. Collector of Central Excise v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (S.C.) 3. Flex Engineering Ltd. v. Commissioner of Central Excise, U.P. - 2012 (276) E.L.T. 153 (S.C.) 4. Tata Engineering and Locomotive Co. Ltd. v. Central Excise, Pune - 2010 (256) E.L.T. 56 (Bom.) 5. Commissioner of Central Excise v. Raj. Spinning and Weaving Mills Ltd. - 2010 (255) E.L.T. 481 (S.C.) 6. Maruti Suzuki Ltd. v. Commissioner of Central Excise Delhi - 2009 (240) E.L.T. 641 (S.C.) 7. Collector of Central Excise v. Solaris Chemtech Ltd. and Ors. - Civil Appeal Nos. 6465-6475 of 2001 . 11. We have heard counsel for the parties. 12. While considering the matter, the tribunal has observed as under :- 7. The duty demand of Rs. Maruti Suzuki Ltd. v. Commissioner of Central Excise Delhi - 2009 (240) E.L.T. 641 (S.C.) 7. Collector of Central Excise v. Solaris Chemtech Ltd. and Ors. - Civil Appeal Nos. 6465-6475 of 2001 . 11. We have heard counsel for the parties. 12. While considering the matter, the tribunal has observed as under :- 7. The duty demand of Rs. 1,71,07,253/- is in respect of the components which had initially been issued for use in the manufacture and were used for assembly of the finished product but on testing the same were found to be defective and hence were taken out and subsequently re-exported. According to the Department, these components have not been used for manufacture of the finished goods and hence invoking Rule 8 of the 1996 Rules, this duty has been demanded. In terms of Rule 8 of 1996 Rules the Assistant Commissioner/Dy. Commissioner shall ensure that the goods imported are used by the manufacturer for the intended purpose and in case they are not so used take action to recover the duty leviable on the goods along with interest on that duty under section 28AB. The point of dispute in this case in respect of this demand is as to whether these goods can be treated as having been used for the intended purpose. We find that in the appellant''s own case decided by the Tribunal''s final order Nos. 53407- 53408/2008, dated 21-8-2014 this very question had come up for consideration. The point of dispute in that case was as to whether in respect of the components which had been issued for manufacture and were used for assembly but later on being found to be defective was re-exported, Cenvat credit of the additional customs duty earlier taken would be reversible and the Tribunal in para 8 of the judgment after considering the Delhi High Court judgment in the case of Asahi India Safety Glass Limited v. Union of India reported in 2005 (180) E.L.T. 5 (Del.) held that such components have to be treated as having been used and hence the assessee cannot be asked to reverse the cenvat credit. Following the judgments of the Tribunal, we hold that these components have to be treated as having been used for the intended purpose and hence the duty demand of Rs. 1,71,07,253/- would not be sustainable and has to be set aside. 8. Following the judgments of the Tribunal, we hold that these components have to be treated as having been used for the intended purpose and hence the duty demand of Rs. 1,71,07,253/- would not be sustainable and has to be set aside. 8. As regards the duty demand of Rs. 94,29,117/- in respect of the surplus inventory which was re-exported and the duty demand of Rs. 23,15,901/- in respect of the components written-off admittedly these components have not been used for the manufacture of the finished products and, therefore, in our view the Department is justified in invoking Rule 8 of the 1996 Rules for recovery of duty. Therefore, the duty demand of Rs. 23,15,901/- and Rs. 94,29,117/- have to be upheld. 8.1 However, since the components in respect of which the duty demand of Rs. 94,29,117/- has been confirmed have been re-exported, in our view, the customs authorities have to consider the appellants'' claim for duty drawback. The appellant also plead that the components which had been issued for manufacture and on being found defective were subsequently re-exported and in respect of which duty demand of Rs. 1,71,07,253/- has been confirmed, they had paid additional customs duty whose credit, though initially taken, was reversed and that they would be eligible for additional customs duty drawback under section 75 of the Customs Act. The concerned customs authority may consider this claim for drawback also. 9 As regards the question of penalty of Rs. 20,23,000/-, the view of the judgment of the Tribunal in the case of Titan Industries Ltd. v. CCE, Chennai (supra) the same is not sustainable. Hence the same is set aside. 13. In our considered opinion, the Tribunal has not considered the matter properly and on the contrary partly allowed the appeal. The customs duty demands of Rs. 23,15,901 and Rs. 94,29,117/- was upheld and only the Customs duty demand of Rs. 1,71,07,253/- and the order of penalty of Rs. 20,23,000/- was quashed. 14. In that view of the matter, the issue is required to be answered in favour of the assessee. 15. The appeals stand dismissed.