2005 (12) TMI 357 - AT - Central Excise

Demand - Rejected goods - clearance after re-making - Whether repair/remaking of rejected batteries involves manufacturing activity attracting duty under the Central Excise Act? - HELD THAT - We find that Rule 173H allows the appellants to receive batteries to be re-made/repaired within a period of one year or within the period of warranty. However, removal of such goods after repair/remaking without payment of duty is conditional upon such process of repairs/remaking not amounting to manufacture as provided under sub-rule (3) of the said Rule 173H. After considering the process of remaking of new batteries from the defective/damaged batteries we are of the view that such remaking amounts to manufacturing. Thus, we are of the view that the appellants are not eligible for duty free clearance of remade batteries under Rule 173H. Accordingly, we set aside the impugned order in appeal and restore the order in original. The appeal is allowed.

Summary

Issues:
Interpretation of Rule 173H of the Central Excise Rules, 1944 regarding the remaking of rejected batteries and whether it amounts to manufacture.

Analysis:
The case involved a dispute regarding the classification of the process of remaking rejected batteries under Rule 173H of the Central Excise Rules, 1944. The appellants were engaged in manufacturing Electric Accumulator (Automobile Batteries) and were availing of Modvat/Cenvat facility. The defective batteries were brought back to the factory during the guarantee/warranty period for remaking. The process involved cutting open the batteries, separating lead and plastic, and reprocessing the defective parts. The refined lead was then used in manufacturing new batteries with distinct serial numbers.

The key provision in question was Rule 173H of the Central Excise Rules, 1944, which allows the retention or bringing into a factory of duty paid goods for various purposes, including re-making, subject to certain conditions. The rule specifies that goods brought in for re-making should not be subjected to any process amounting to manufacture to qualify for duty-free removal.

The tribunal analyzed the process of remaking the batteries and held that it amounted to manufacturing based on precedents and decisions from other cases. The tribunal cited cases such as Tecumseh Products India Ltd. v. C.C.E., Hyderabad, DSM Anti-infective India (P.) Ltd. v. C.C.E., Chandigarh, and Maruti Udyog v. C.C.E., New Delhi-III to support their conclusion. These cases established that processes undertaken to make defective products fit for consumption and marketable would be considered as manufacturing.

Therefore, the tribunal concluded that the appellants were not eligible for duty-free clearance of remade batteries under Rule 173H. The impugned order was set aside, and the original order was restored, allowing the appeal in favor of the revenue authorities.

In summary, the judgment clarified the interpretation of Rule 173H regarding the remaking of rejected batteries, emphasizing that processes amounting to manufacturing would not qualify for duty-free clearance under the rule. The decision was based on established legal precedents and upheld the revenue authorities' position in the case.