Rule 173L refund for returned rejected goods allowed when reprocessed goods were again cleared on duty payment.

Refund under Rule 173L of the Central Excise Rules was admissible where duty-paid rejected goods were returned, brought back into the factory after declaration and verification, reprocessed in a continuous manufacturing stream, and the resulting goods were again cleared on payment of duty. The rule did not require rigid segregation of each returned lot or separate accountal where such segregation was impracticable in chemical manufacture, provided the returned goods were actually reprocessed and the final products again suffered duty. The Revenue's appeals were dismissed and the assessee obtained consequential relief.

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Issues: Whether refund under Rule 173L of the Central Excise Rules was admissible where rejected goods were received back, entered in stock after verification, reprocessed in the continuous manufacturing stream, and the reprocessed goods were again cleared on payment of duty.

Analysis: The factual position was not in dispute that the goods had originally suffered duty, were returned by customers, were brought back into the factory after due declaration and verification, and were thereafter reprocessed into goods of the same class which were again duty paid on clearance. The insistence on separate reprocessing of each returned lot and separate maintenance of accountal was held to be impracticable in the case of chemical products where the manufacturing process is continuous and cannot be halted. The rule did not require such rigid segregation where the returned goods had in fact been subjected to reprocessing and the resulting goods had again borne duty.

Conclusion: Refund under Rule 173L was admissible, subject to satisfaction of the other conditions in the rule. The appeals filed by the Revenue were dismissed and the assessee's appeal was allowed with consequential relief.

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