Rule 173H inapplicable where returned duty-paid goods were received at a registered office, not re-entered into the factory.

Rule 173H of the Central Excise Rules, 1944 applies only when duty-paid goods re-enter the factory for remaking, refining, reconditioning or similar treatment under the prescribed procedure. On the admitted facts, the returned goods were received at the registered office and were not taken back into the factory, so the rule did not apply. As the duty demand and penalties were founded solely on alleged non-compliance with Rule 173H, the basis for both failed and the demand and penalties were set aside in favour of the assessee.

---

---

Issues: Whether Rule 173H of the Central Excise Rules, 1944 applied to goods returned to the registered office and thereafter dispatched to other parties, and whether the duty demand and penalties founded on non-compliance with that rule could be sustained.

Analysis: Rule 173H is attracted where duty-paid goods are re-entered in the factory for being remade, refined, reconditioned or otherwise dealt with under the procedure prescribed by the rule, including intimation within the stipulated time. The admitted facts showed that the returned duty-paid materials were received at the registered office and not taken back into the factory. On that factual position, the procedural requirement under Rule 173H was not applicable. Since the demand and penalties were imposed only for alleged breach of that rule, the foundation for the confirmed duty and consequential penalties failed.

Conclusion: Rule 173H was held inapplicable and the duty demand and penalties were set aside in favour of the assessee.

Ratio Decidendi: A procedural provision governing re-entry of duty-paid goods into a factory cannot be invoked where the goods are received at a registered office and not returned to the factory.

---