1996 (10) TMI 306 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 173H of the Central Excise Rules, 1944 regarding reconditioning and re-supply of goods, demand of Central Excise duty on differential value, applicability of Rule 173H on returned goods, determination of duty on processed goods, double taxation concern, choice between Rule 173H and Rule 173L procedures.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved the interpretation of Rule 173H of the Central Excise Rules, 1944 concerning the reconditioning and re-supply of rolling bearings by M/s. Antifriction Bearing Corporation Ltd. The issue arose when the appellants brought back duty-paid goods under Rule 173H for reconditioning and later sold them at higher prices to new buyers. A Show Cause Notice was issued demanding Central Excise duty on the differential value, invoking the extended period of limitation from 1982 to May 1987.

The Collector of Central Excise, Pune confirmed the demand of Rs. 34,046 without imposing any penalty. The matter was brought before the Appellate Tribunal, where the Department argued that the real sale occurred when the reconditioned goods were resold, justifying the demand for duty on the differential value.

Upon careful consideration, the Tribunal analyzed Rule 173H, which allows bringing back duty-paid goods for reconditioning without payment of duty if not subjected to a process amounting to manufacture. The Tribunal noted that if the processing does not result in a new distinct article, imposing duty upon resale may lead to double taxation. The appellants contended that not all reconditioned goods were sold at higher prices, citing instances of lower rates.

Referring to precedents, the Tribunal highlighted that Rule 173H applies unless a new commercially distinct article is created through processing. The Tribunal also noted that the choice between Rule 173H and Rule 173L procedures lies with the assessee. As the returned goods were duty paid and covered by Rule 173H without any violation of specified conditions, the Tribunal held that no differential Central Excise Duty was chargeable upon resale. Consequently, the appeal by M/s. Antifriction Bearing Corporation Ltd. was allowed, overturning the decision of the adjudicating Collector of Central Excise.

In conclusion, the Tribunal ordered in favor of the appellants, emphasizing the correct interpretation and application of Rule 173H in the context of reconditioning and resale of goods, ensuring avoidance of double taxation and upholding the procedural choices available to the assessee under the Central Excise Rules.