Manufacture under Rule 173H applies when defective batteries are processed into commercially new goods, defeating duty-free clearance.

Defective or damaged batteries returned within the warranty period and processed under Rule 173H of the Central Excise Rules, 1944 were held to involve manufacture where the operation went beyond repair or remaking. The goods were cut open, separated, re-melted and refined, and the refined lead was then used to make new batteries with distinct serial numbers. On those facts, the process produced a commercially new product rather than the same goods in repaired form, so duty-free removal under sub-rule (3) was not available. The cited principle is that a process creating a new manufactured product or rendering goods fit for use by a manufacturing process amounts to manufacture.

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Issues: Whether remaking of defective or damaged batteries received back within the warranty period under Rule 173H of the Central Excise Rules, 1944 amounted to manufacture, thereby disentitling the assessee from duty-free removal after processing.

Analysis: Rule 173H permits excisable goods to be brought back into the factory for re-making, reconditioning or repair, but sub-rule (3) allows removal without payment of duty only if the process does not amount to manufacture. The batteries in question were cut open, separated, re-melted and refined, and the refined lead was used in the manufacture of new batteries with distinct serial numbers. On these facts, the process was not a mere repair or remaking of the same goods but resulted in manufacture of new goods. The conclusion was supported by the cited authorities holding that where a process brings into existence a commercially new product or makes goods fit for use by a manufacturing process, it amounts to manufacture.

Conclusion: The process amounted to manufacture and the assessee was not entitled to duty-free clearance under Rule 173H.

Final Conclusion: The order denying relief was restored and the appeal succeeded.

Ratio Decidendi: Where defective goods brought back under Rule 173H undergo processing that brings into existence a new manufactured product, the removal of such goods without payment of duty is not permissible under sub-rule (3).

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