2010 (3) TMI 142 - HC - Central Excise

Payment of duty on reprocessed goods receipt of fresh goods without payment of duty in the guise of reprocessed goods - M/s Ranbaxy Labs manufactured Bulk Drugs of Pencillin from their unit situated in Ponta Sahib and sent the same after payment of duty to their Mohali Unit and in Mohali Unit it transpired that manufacture was defective and the same was sent back to Ponta Sahib unit. After re-processing and re-manufacturing of the defective goods the same were sent back to Mohali Unit and thereafter sold. - The department claimed that the manufacturer is liable to pay the duty on the re-processing of manufactured bulk drugs by the respondent. The demand was confirmed against the assessee by the Assessing Authority which was also confirmed by the Commissioner (Appeals). However the Appellate Tribunal has set aside the demand on the ground that the goods which were re-processed does not amount to manufacture. Held that as the duty has already been paid on the goods which were manufactured earlier and the same were not sold and sent back being defective in nature therefore no fresh duty is liable to pay by the assessee.

Summary

Issues:
1. Whether reprocessing of defective goods amounts to manufacture for the purpose of duty liability.

Analysis:
The judgment involves a challenge to an order passed by the Customs, Excise & Service Tax Appellate Tribunal, where the appeal filed by the revenue was dismissed. The main issue for determination was whether reprocessing defective goods constitutes manufacture for the purpose of duty liability. The case revolved around a manufacturer of Bulk Drugs who reprocessed defective goods and whether duty was payable on the reprocessing.

The facts of the case highlighted that the manufacturer initially paid duty on the goods, which were later found to be defective. The defective goods were sent back for reprocessing and then sold. The revenue contended that duty was payable on the reprocessing as fresh goods were manufactured. In contrast, the assessee argued that since duty was already paid on the original goods, no additional duty was liable on the reprocessed goods. The assessee relied on a previous court decision to support their argument.

The High Court, in its analysis, referred to the previous court decision where it was held that no duty could be demanded on repaired or internally damaged vehicles that were cleared on payment of duty. The Court found that the present case was similar to the precedent case, and therefore, ruled in favor of the assessee. The judgment concluded by dismissing the appeal filed by the revenue, stating that the duty liability did not extend to the reprocessed goods in this scenario.

In summary, the judgment clarified that reprocessing defective goods did not amount to manufacture for the purpose of imposing duty liability, especially when duty had already been paid on the original goods. The decision was based on the interpretation of relevant laws and previous court precedents, ultimately leading to the dismissal of the revenue's appeal.