In-factory re-packing of accounted excisable goods did not trigger duty, and extended limitation failed without suppression.

Excise duty was not payable on paper taken out of RG-1 within the factory for re-packing and then re-entered in RG-1 before final clearance, because the goods remained accounted for in statutory records and were cleared on payment of duty. The Board's circular on in-factory transfer for re-processing or re-conditioning supported that such internal handling does not by itself create a duty liability. The extended limitation period was also unavailable, as monthly intimation and return disclosures showed no suppression, clandestine removal, or intent to evade duty. The demand was therefore unsustainable on both merits and limitation, with consequential relief following in law.

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Issues: (i) Whether excise duty was payable on paper taken out of RG-1 for re-packing within the factory and thereafter re-entered in RG-1 before clearance on payment of duty; (ii) whether the extended period of limitation could be invoked in the absence of suppression.

Issue (i): Whether excise duty was payable on paper taken out of RG-1 for re-packing within the factory and thereafter re-entered in RG-1 before clearance on payment of duty.

Analysis: The factual position showed that the goods remained within the factory, were duly accounted for in RG-1/DSA records, were taken out only for re-packing to meet customer requirements, were again brought back into RG-1, and were finally cleared on payment of duty. The same reasoning applied to re-packing as to re-processing, as both involved goods already treated as manufactured and properly accounted for. The Board's Circular No. 22/71-CX.6 dated 30.10.1971 recognized that defective or damaged excisable goods may be transferred within the factory for re-processing or re-conditioning without payment of duty after necessary accounting entries.

Conclusion: Excise duty was not payable on the re-packed goods merely because they were taken out of RG-1 for in-factory re-packing and later restored to RG-1 before clearance.

Issue (ii): Whether the extended period of limitation could be invoked in the absence of suppression.

Analysis: The records showed monthly intimation to the Range office and disclosure of the transactions in the monthly returns. In the absence of any material showing clandestine removal, non-accountal, or intent to evade duty, the foundation for alleging suppression was not made out. Accordingly, the conditions for invocation of the extended limitation period were not satisfied.

Conclusion: The extended period of limitation was not invocable.

Final Conclusion: The demand was unsustainable both on merits and on limitation, and the appellant was entitled to consequential relief in accordance with law.

Ratio Decidendi: Excisable goods removed within the factory for re-packing or re-processing, when duly accounted for in statutory records and cleared after restoration to RG-1, do not attract duty in the absence of revenue loss or clandestine removal, and the extended period cannot be invoked without proof of suppression or intent to evade duty.

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