2012 (5) TMI 296 - AT - Central Excise

Demand of duty on clearance of re-processed goods - respondents had received back certain products manufactured by them on being rejected, for further processing Held that - processes carried out by the respondent on the duty paid finished goods which were received back by them being rejected would not amount to manufacture and hence no duty was payable by the respondent on the reprocessed goods, appeal dismissed

Summary

Issues:
Appeal against dropping of proceedings for demanding duty on re-processed goods; Interpretation of chapter note 11 of chapter 29; Application of Rule 173H of Central Excise Rules, 1944; Comparison with previous judgments on similar cases.

Analysis:
The appeal arose from the Commissioner's order dropping proceedings initiated against the respondents for demanding duty on re-processed goods. The department relied on chapter note 11 of chapter 29 to justify the duty demand, while the respondents cited Rule 173H(2)(c) of Central Excise Rules, 1944. The Commissioner upheld the respondents' contention, leading to the present appeal.

The appellant argued that the Commissioner erred in dropping the proceedings, citing the Nestle India Limited case and the definition of 'manufacture' under Section 2(f) of Central Excise Act, 1944. However, the Commissioner observed that the goods received back were rejected tablets and capsules, subject to further processing without duty payment under Rule 173H. The Commissioner found chapter note 11 of chapter 29 inapplicable as the goods were not newly manufactured. Reference was made to Circular No. 2/87 and the Ranbaxy Laboratories Ltd. case to support this view.

The Tribunal differentiated the present case from Nestle India Limited, emphasizing the reprocessing of already manufactured goods. Citing the Ranbaxy Laboratories Ltd. case and the High Court decision in the same matter, it concluded that the reprocessing did not amount to manufacture, aligning with the Pepsi Foods case precedent. The High Court's decision provided a definitive answer to the issue, leading to the dismissal of the appeal without interference with the Commissioner's order.

In summary, the Tribunal's analysis focused on the interpretation of relevant legal provisions, previous judgments, and the specific circumstances of the case to determine the non-applicability of duty on re-processed goods. The comparison with established case law and the High Court's decision provided a strong basis for dismissing the appeal and upholding the Commissioner's order.