Rule 173H and blending of rejected excisable goods do not amount to manufacture when the product remains the same in substance.

Receipt and blending of rejected Sodium Carboxy Methyl Cellulose under the declared return procedure, with proper records and Form-V entries, was treated as re-making within Rule 173H of the Central Excise Rules, 1944. The process did not create a new excisable commodity because the blended product remained Sodium Carboxy Methyl Cellulose in substance, only of a different grade. On those facts, blending or similar modification did not amount to remanufacture, so the duty demand and penalty could not stand.

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Issues: Whether the receipt and blending of rejected Sodium Carboxy Methyl Cellulose of one grade with another grade, resulting in clearance of the latter grade, amounted to remanufacture outside the scope of Rule 173H of the Central Excise Rules, 1944.

Analysis: The rejected goods were received back under the declared procedure, proper records were maintained, and the Form-V register showed that the goods were issued for blending. The resultant product continued to be Sodium Carboxy Methyl Cellulose, though of a different grade, and no material was brought on record to show that the blended product became a new commodity. Rule 173H permits re-making and similar processes, and the mere fact that the process involved blending or some modification did not, on the facts, convert the activity into manufacture of a new excisable product.

Conclusion: The activity fell within Rule 173H and did not amount to remanufacture of a new product; the duty demand and penalty could not stand.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Where goods received back after rejection remain the same product in substance and the processing only amounts to re-making, blending, or other similar permitted operations, Rule 173H applies and the process does not constitute manufacture of a new excisable commodity.

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