1990 (5) TMI 115 - AT - Central Excise

Summary

Issues:
- Whether reprocessed goods cleared without payment of duty are considered the same goods received initially under Rule 173-H of Central Excise Rules, 1944?
- Whether the reprocessed goods should be subjected to duty as a separate commodity under the excise law?
- Whether the extended period of 5 years under Section 11A is applicable in this case?
- Whether the demand raised through three Show Cause Notices was sustainable?

Analysis:

1. Reprocessed Goods Identity under Rule 173-H:
The case involved a dispute regarding the classification of reprocessed goods cleared without payment of duty under Rule 173-H of the Central Excise Rules. The respondents argued that the reprocessed goods maintained the same characteristics as the original goods received. The Tribunal examined the transformation process and held that a mere change in physical form, shape, or substance does not necessarily constitute manufacturing. Citing previous judgments, including the Supreme Court decision in Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd., the Tribunal emphasized that for a process to be considered manufacturing, it must result in the emergence of a new identifiable product with distinct characteristics, name, or use. As the reprocessed goods did not meet this criterion, the Tribunal concluded that they should not be treated as a separate commodity for duty purposes.

2. Duty Liability of Reprocessed Goods:
The Revenue contended that the reprocessed goods, being different from the original goods in name, form, and use, should be subject to duty as a separate commodity. However, the Tribunal found that the reprocessing did not alter the fundamental characteristics or nature of the goods, as they were returned due to quality issues and could not be improved to standard quality. Without evidence from the Department to prove a substantial change in the goods, the Tribunal rejected the argument that the reprocessed goods constituted a new taxable commodity. The Tribunal's decision was guided by the principle that not every change in a product amounts to manufacturing, especially when the core attributes of the goods remain unchanged.

3. Applicability of Extended Period under Section 11A:
The Revenue also raised the issue of the extended period of 5 years under Section 11A for demanding duty on the reprocessed goods. However, the Tribunal did not delve into the limitation aspect as it dismissed the appeal on the merits of the case. The Tribunal's decision focused on the substantive issue of whether the reprocessed goods should be considered a new taxable product, based on the lack of transformation in the goods despite the reprocessing activities.

4. Sustainability of Show Cause Notices:
Regarding the sustainability of the demand raised through three Show Cause Notices, the Tribunal did not find the allegations of suppression of facts to be substantiated. The Tribunal noted that two of the show cause notices were time-barred and emphasized that in the absence of evidence demonstrating a significant change in the goods or concealment of material facts, the demand for duty on the reprocessed goods was not justified. The Tribunal's decision to dismiss the appeal was primarily grounded in the determination that the reprocessed goods did not qualify as a distinct taxable commodity under the excise law.

In conclusion, the Tribunal upheld the order of the Collector of Central Excise (Appeals), ruling in favor of the respondents and dismissing the Revenue's appeal.