Rule 173H treatment of returned duty-paid goods: mere grade change does not create a new excisable product.

Duty-paid goods received back into the factory for remaking, after D-3 intimation, were covered by Rule 173H where the goods remained polyester chips under the same tariff heading. The process undertaken did not result in a new excisable product, because a mere change or upgradation in grade does not amount to manufacture for central excise purposes. On that basis, clearance of the remade goods without payment of duty was held to be permissible and the duty demand was not sustainable.

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Issues: Whether goods received back after duty-paid clearance and subjected to remaking could be cleared without payment of duty under Rule 173H, and whether a mere change in grade amounted to manufacture of a new excisable product.

Analysis: Rule 173H permits duty-paid goods received in the factory to be remade, refined, reconditioned, repaired or subjected to similar process. The goods in question were received back, D-3 intimation was filed, and some process was undertaken before clearance. The resulting goods continued to be polyester chips classifiable under the same tariff heading. A mere change or upgradation in grade did not convert the same goods into a distinct new product for central excise purposes.

Conclusion: The clearance of the remade goods without payment of duty was covered by Rule 173H and no duty demand was sustainable. The finding was in favour of the assessee.

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