Composite packing does not create a new excisable product; exempt goods keep their status, with rule 57AD adjusted for duty paid.

Distinct goods packed together do not become a new excisable product merely because they are sold in a composite pack; the exempt character of chloroquine phosphate was therefore not displaced by packaging it with bulaquine. Common inputs used in the manufacture of exempted and dutiable goods remained subject to rule 57AD, but any duty actually discharged on the exempted component had to be verified and adjusted while computing the liability. The remand was accordingly modified to require determination of the value of chloroquine phosphate, verification of duty paid on it, and recalculation of the balance amount payable.

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Issues: (i) whether packing exempted and dutiable products together in a single package created a new product so as to alter the treatment of the exempted component; (ii) whether the remand required modification to account for duty already discharged on the exempted component while computing liability under rule 57AD.

Issue (i): whether packing exempted and dutiable products together in a single package created a new product so as to alter the treatment of the exempted component.

Analysis: The products remained two distinct goods with separate classification. The declaration filed under rule 173B showed clearance of the two items in one pack, but not classification of a new commodity in the packed form. In the absence of a chemical description of the combined pack and the supporting licence contemplated by the Drugs and Cosmetics Rules, the combined packaging did not bring a new product into existence. The exempt character of chloroquine phosphate was therefore not displaced by its being sold with bulaquine.

Conclusion: The combined packing did not create a new product, and chloroquine phosphate continued to be treated as exempted goods.

Issue (ii): whether the remand required modification to account for duty already discharged on the exempted component while computing liability under rule 57AD.

Analysis: Since chloroquine phosphate remained exempted goods, common inputs used for its manufacture and for other dutiable goods attracted liability under rule 57AD. At the same time, if duty had in fact been discharged on chloroquine phosphate at the claimed rate on the value of the composite pack, that duty had to be adjusted while computing the amount payable under rule 57AD. The lower authority was therefore required to verify the actual duty discharge and then determine the value and resultant balance liability.

Conclusion: The remand was modified to require verification of duty paid on chloroquine phosphate, determination of its value for rule 57AD purposes, and computation of the remaining liability.

Final Conclusion: The appeal succeeded only to the extent of modification of the remand directions, while the applicability of rule 57AD to common inputs used in exempted goods was maintained.

Ratio Decidendi: Distinct goods packed together do not become a new excisable product merely by composite packaging, and common inputs used in exempted manufacture attract rule 57AD liability, subject to credit for any duty actually discharged on the exempted component.

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