Gate pass cancellation and duty recredit under Central Excise rules barred a second demand on returned goods.

Rule 173G(2)(vii) allowed an assessee, after paying duty in the PLA, to cancel a gate pass and intimate the proper Central Excise officer by the next working day, with corresponding recredit of duty. Where the goods were returned to the factory and the gate passes were cancelled on the same date as the recredit, the demand could not be confirmed again on the same goods. The view that cancellation became impermissible merely because the goods had already left the factory was not supported by the rule, and the alternative procedure under Rule 51A/173H was not attracted on the facts stated.

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Issues: Whether duty could be demanded again when gate passes were cancelled after the goods had been cleared, intimation was given to the department, duty was recredited in the PLA, and the goods were returned to the factory.

Analysis: Rule 173G(2)(vii) permitted an assessee, after payment of duty in the PLA, to cancel a gate pass and intimate the proper Central Excise officer by the next working day, whereupon credit of the duty could be taken. The goods were admittedly returned to the factory and the gate passes were cancelled on the same date on which recredit was taken. The view that cancellation was impermissible merely because the goods had already left the factory was not supported by the rule, and the alternative route under Rule 51A/173H did not arise on the facts as recorded.

Conclusion: The duty demand on the same goods could not be confirmed again and the demand and penalty were unsustainable.

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