1996 (5) TMI 228 - AT - Central Excise

Summary

Issues:
Demand of differential duty under Rule 173H for motor bikes cleared from factory, interpretation of Notification No. 217/86, applicability of Rule 173H procedures, justification for differential duty, comparison of Rule 173H with Rule 173L.

Analysis:
The appeal concerned the demand of a differential duty for motor bikes cleared from the factory under Rule 173H. The lower authority held that the appellants' reliance on Notification No. 217/86 was misplaced as the impugned transactions fell under Rule 173H, not the notification exempting modvat items used within the factory of production. The appellants' Advocate sought adjournment due to hospitalization, but the appeal was taken up for disposal on merits due to the issue's simplicity.

The Department argued that the model of the motor bikes changed after processes carried out under Rule 173H, resulting in a higher price. They contended that the Revenue was entitled to the differential duty due to the value addition from these processes. However, they failed to show how the demand of differential duty could be justified under Rule 173H once the appellants complied with its requirements.

The Tribunal observed that the appellants were allowed the facility under Rule 173H to re-make, refine, or repair goods in the factory. The modifications made by the appellants resulting in a model change did not constitute manufacturing a new product for excise purposes. The goods remained under the same Tariff Heading, and any duty demand had to be in accordance with Rule 173H. Unlike Rule 173L, where goods are treated as new manufacture after certain processes, Rule 173H did not require duty payment for goods cleared after permitted operations. The differential duty demanded was not on the full value of the goods, indicating that the authorities did not treat the product as newly manufactured. Consequently, the Tribunal held the demand was not sustainable in law, and the appeal was allowed.