2007 (12) TMI 351 - AT - Central Excise

Summary

Issues:
1. Whether duty is payable on goods cleared after remaking under Rule 173-H of Central Excise Rules.

Analysis:
The case involved the appeal filed by the Revenue against an order where the demand for duty was set aside because the respondent had cleared goods after remaking under Rule 173-H of Central Excise Rules. The respondents were in the business of manufacturing polyester chips and had cleared a certain quantity of chips on payment of duty. Later, some chips were received back from a customer, and in January 1999, these returned goods were cleared without payment of duty. The Revenue contended that the chips cleared in January 1999 were of a different grade than those received back, and duty should be demanded under Rule 173H. The respondent argued that the remaking of chips resulted in a change of grade but remained classifiable under the same tariff heading. They claimed that no duty should be demanded as the goods fell within the process allowed under Rule 173H and that the change in grade did not amount to manufacturing a new product for excise duty purposes.

The Tribunal considered the facts where the respondent had cleared polyester chips of one grade on payment of duty, received them back, filed the necessary intimation, and then undertook processes before clearing the chips without duty payment. The Tribunal noted that Rule 173H allows for remaking, refining, reconditioning, or similar processes for duty-paid goods received in the factory. The Tribunal found that the processes undertaken by the respondent fell within the definition of Rule 173H. It held that a mere change in grade of goods classifiable under the same tariff heading did not constitute manufacturing a new distinct item. Therefore, the Tribunal found no issue with the impugned order and dismissed the appeal.

In conclusion, the judgment clarified that duty is not payable on goods cleared after remaking under Rule 173-H of Central Excise Rules if the goods remain classifiable under the same tariff heading despite a change in grade. The case highlighted the importance of understanding the provisions of Rule 173H and how they apply to goods undergoing processes within the factory premises.