Rule 173H duty demand requires proof of remanufacture; unsupported all-goods demand, interest, fine, and penalty were set aside.

Duty cannot be demanded on all goods received back for repair under Rule 173H unless the Department proves that each item was remanufactured and subject to further duty. The Commissioner was required to carry out the remand directions and independently examine the records, but instead repeated the earlier demand without addressing the assessee's D3 intimations, internal records, or duty already paid on goods where fresh components were used. The stricter record requirements of Rule 173L could not be imported into Rule 173H absent specific conditions or directions. The demand was therefore set aside except for the duty already admitted and paid, and interest, fine, and penalty were also set aside.

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Issues: Whether the demand of duty on all goods received back under Rule 173H of the Central Excise Rules, 1944, together with interest, fine and penalty, was sustainable.

Analysis: The adjudicating Commissioner had merely repeated the earlier demand without undertaking the fresh examination directed in remand and without independently dealing with the records produced. The material relied upon by the Department did not establish that every item received back for repair had been remanufactured. The assessee had submitted D3 intimations, maintained internal records for goods that were remade, and paid duty on the quantities where fresh components were used. The stricter record requirement applicable to Rule 173L could not be imported into Rule 173H, and no specific additional conditions or record-keeping directions were shown to have been imposed.

Conclusion: The demand of duty on all goods was not sustainable; it was set aside except to the extent of the duty already admitted and paid. Interest was not payable on the amount paid before the statutory provision for interest came into force, and the fine and penalty were also set aside.

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