Excise duty on repaired transformers requires manufacture; procedural delay in repair clearance alone cannot sustain duty or penalty.

Central excise duty was not attracted on transformers sent back for repair and cleared after repair because the record did not show that the work amounted to manufacture or that any new transformer came into existence. A mere procedural lapse under the repair-return mechanism could not trigger the charging provision where the goods were only repaired. Penalty was also not sustainable because the goods were covered by a general relaxation for repair outside the place of manufacture, the intimation had been filed, and the eventual repair and removal showed no basis for penal action solely on delay or failure to obtain extension. The impugned orders were set aside.

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Issues: (i) whether central excise duty was payable on transformers received back for repairs and removed after repair without treating the process as manufacture; (ii) whether penalty was sustainable for non-compliance with the time requirement under the repair procedure.

Issue (i): Whether central excise duty was payable on transformers received back for repairs and removed after repair without treating the process as manufacture.

Analysis: The transformers had been received back for repair and were subsequently cleared after repair only. The record did not establish that the process undertaken amounted to manufacture or that new transformers had come into existence. In the absence of manufacture, the charging provision for central excise duty could not be invoked merely because the procedural requirement under the repair provision was not complied with within the prescribed period.

Conclusion: Duty was not payable and the demand was unsustainable in favour of the assessee.

Issue (ii): Whether penalty was sustainable for non-compliance with the time requirement under the repair procedure.

Analysis: The Board had issued instructions granting general relaxation for goods such as transformers requiring repair away from the place of manufacture. The intimation had been filed and the goods were ultimately repaired and removed. In these circumstances, penalty could not be upheld solely on the ground of delay or failure to obtain extension of time where the relaxation was intended to cover such cases.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned orders were set aside and the appeal was allowed.

Ratio Decidendi: Excise duty is attracted only when a process results in manufacture, and a procedural lapse in the repair-return mechanism cannot by itself sustain duty or penalty where the goods are merely repaired and no manufacture is shown.

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