Repacking of excisable goods: no sustained duty demand where goods are re-entered into DSA, properly recorded and cleared on payment.

Goods removed from factory DSA for re-packing and subsequently re-entered into DSA with contemporaneous RG-1/DSA entries, monthly returns and prior intimation, and later cleared on payment of duty, do not attract a sustained demand where there is no revenue loss or suppression. The Tribunal applied the principle permitting transfer of defective/damaged excisable goods for reprocessing/reconditioning without immediate duty payment when properly accounted for on re-entry, and set aside the confirmed demand for duty, interest and penalty, allowing the appeal in favour of the assessee.

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Issues: Whether goods taken out of the DSA/RG-1 for the purpose of re-packing within the factory (to make packing acceptable to customers or to rectify wrong packing) are exigible to central excise duty when the goods are thereafter re-entered into DSA and cleared on payment of duty; and whether the departmental demand, interest and penalty confirmed against the assessee on that basis are sustainable.

Analysis: The Tribunal examined the factual position that quantities were removed from DSA for re-packing, re-entered into DSA after re-packing and cleared on payment of duty, with contemporaneous entries in RG-1/DSA records and monthly returns and prior intimation to departmental officers. The Tribunal followed its earlier detailed decision in ITC Ltd. v. Commissioner of C.Ex., Kolkata-IV where identical facts were held to attract the Board's Circular dated 30-10-1971 permitting transfer of defective/damaged excisable goods from factory storeroom for re-processing/re-conditioning without payment of duty after making necessary entries. The Tribunal also relied on precedent (including Collector of Central Excise, Meerut v. Supreme Industries Ltd. and Modi Plastic) and applied the principle that where goods removed for reprocessing/repacking are finally accounted for, re-entered in DSA and cleared on payment of duty with no revenue loss or suppression, demand cannot be sustained. The Tribunal noted that the adjudicating authority had already accepted the appellant's case in part (re-pulping) and that the same reasoning applied to repacking to make goods marketable.

Conclusion: The demand of central excise duty, interest and penalty confirmed against the appellant in the impugned orders is set aside and the appeal is allowed with consequential relief as per law; the decision is in favour of the assessee.

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