Procedural lapse under Rule 173H does not sustain duty demand where goods were actually received for repair and re-cleared.

Duty demand could not be sustained merely on the basis of an alleged procedural lapse where goods were received for repair under Rule 173H and re-cleared after repairs. The notice was found to be cryptic and vague, and the record showed that repairs were actually carried out and duty had been paid on replaced components. In the absence of any allegation or finding that the goods were in fact freshly manufactured goods cleared under the guise of repair, a procedural infraction alone was insufficient to uphold the demand.

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Issues: Whether duty demand could be sustained on goods received under Rule 173H and re-cleared after repairs, merely on the basis of an alleged procedural lapse in following the prescribed procedure.

Analysis: The show cause notice was found to be cryptic and vague. It was undisputed that the goods had been received for repair under Rule 173H and that repairs were carried out. The record also indicated that whenever components were replaced during repairs, duty had been paid on such components. The difficulty faced by the assessee in complying with the procedure under Rule 173H had been recognised by the department over time and relaxation had been allowed. On these facts, a mere procedural infraction could not justify the conclusion that the repaired goods were in truth freshly manufactured goods cleared under the guise of Rule 173H. No allegation or finding to that effect had been made.

Conclusion: The duty demand was not sustainable and the appeal succeeded in favour of the assessee.

Ratio Decidendi: A duty demand cannot be upheld merely for procedural non-compliance where the goods are shown to have been received for repair and re-cleared as repaired goods, unless there is a clear allegation and finding that they were actually fresh manufactured goods.

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