Rule 173H remaking of motor bikes did not amount to fresh manufacture, so differential duty on re-clearance was unsustainable.

Goods validly received back under Rule 173H of the Central Excise Rules, 1944 for remaking did not undergo fresh manufacture where the process only modified the motor bikes and the cleared goods remained within the same tariff heading. Rule 173H contains no deeming fiction for treating the processed goods as newly manufactured, unlike Rule 173L; therefore, differential duty could not be demanded merely because the re-cleared goods fetched a higher price. The demand was held unsustainable and set aside in favour of the assessee.

---

---

Issues: Whether goods brought back into the factory under Rule 173H of the Central Excise Rules, 1944 and subjected to modifications resulting in a change of model could be treated as a new manufacture so as to justify demand of differential duty on their later clearance.

Analysis: The goods were permitted to be brought back under Rule 173H for re-making or similar processes, and the record did not show that the facility was wrongly granted. The operations carried out only modified the motor bikes and the goods emerging after the process continued to remain motor bikes under the same tariff heading. The Tribunal held that such change or upgradation amounted only to remaking within Rule 173H. It further noted that Rule 173H does not contemplate duty on the cleared goods after such operations, unlike Rule 173L where a deeming fiction treats the goods as newly manufactured. Since the demand was only for differential duty attributable to value addition and not on the full assessable value as fresh manufacture, the department itself was not proceeding on the basis that a new product had come into existence.

Conclusion: The demand of differential duty was not sustainable in law and was set aside in favour of the assessee.

Ratio Decidendi: Where goods are validly received back under Rule 173H for remaking and the process does not result in a product falling outside the original tariff description, no fresh manufacture is deemed and differential duty cannot be demanded merely because the goods fetch a higher price on re-clearance.

---