Relabelling of returned goods without fresh repacking is not manufacture; Rule 173H applies and extended limitation is unavailable.

Returned excisable goods subjected only to relabelling, without fresh repacking from bulk to retail packs, do not undergo manufacture; Rule 173H remains available and the duty demand cannot be sustained on that basis. The Tribunal also found that, where the assessee had given departmental intimation and acted under a bona fide belief, there was no basis to invoke the extended period of limitation in the absence of suppression or wilful misstatement. The duty demand was therefore time-barred and set aside with consequential relief.

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Issues: (i) whether the demand was barred by limitation and the extended period could be invoked; (ii) whether mere relabelling of returned goods amounted to manufacture so as to exclude the applicability of Rule 173H and sustain the duty demand.

Issue (i): whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The appellants had given the departmental intimation and acted under a bona fide belief that relabelling did not amount to manufacture. On those facts, there was no justification for applying the longer period of limitation.

Conclusion: The demand was time-barred and the extended period could not be invoked.

Issue (ii): whether mere relabelling of returned goods amounted to manufacture so as to exclude the applicability of Rule 173H and sustain the duty demand.

Analysis: The goods had already undergone the relevant packing and labelling process at the time of original clearance. When they were returned only for removal of defective labels, the subsequent activity was merely relabelling. Applying the reasoning that relabelling amounts to manufacture only when it accompanies repacking from bulk to retail packs, the Tribunal held that the later activity did not constitute manufacture. Rule 173H therefore applied.

Conclusion: Mere relabelling did not amount to manufacture, Rule 173H applied, and the duty demand was not sustainable.

Final Conclusion: The appeal succeeded and the duty demand was set aside with consequential relief.

Ratio Decidendi: Where returned excisable goods are subjected only to relabelling and not to fresh repacking from bulk to retail packs, the process does not constitute manufacture and the return-clearance procedure under Rule 173H remains available; in the absence of suppression or wilful misstatement, the extended period of limitation cannot be invoked.

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