Final-duty payment bars short-levy demand on semi-finished medicines cleared for further manufacture.

Duty on patent and proprietary medicines was held to attach when manufacture was completed by packing, and payment by the receiving manufacturer on the finished goods discharged the levy. A demand under Section 11A for alleged short levy on semi-finished medicines cleared for further manufacture could not be sustained where the final excisable product had already borne duty. Removal of semi-finished goods under Rule 56B remained permissible, and separate valuation or intermediate clearance did not create a fresh short-payment liability. The demand was therefore unjustified and the assessee obtained relief.

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Issues: Whether a demand under Section 11A could be sustained for alleged short levy on semi-finished patent and proprietary medicines cleared for further manufacture when duty on the finished packed medicines had already been paid by the receiving manufacturer.

Analysis: The duty liability in the facts of the case attached to the patent and proprietary medicines at the stage when manufacture was completed by packing. The receiving manufacturer discharged the duty payable on the finished goods. Section 11A applies only where duty has not been levied, not paid, short paid, or erroneously refunded. Once duty was correctly discharged at the stage of finished manufacture, no short levy or short payment could be fastened on the appellants merely because the semi-finished goods had been cleared under Rule 56A. The removal of semi-finished goods for completion of manufacture was permissible under Rule 56B, and payment of some duty at the intermediate stage did not alter that legal position.

Conclusion: The demand was not sustainable and was held to be unjustified; the appeals succeeded and the assessee was entitled to relief.

Ratio Decidendi: Where duty on the final excisable product has been duly paid at the stage when manufacture is completed, a demand for short levy on an earlier semi-finished stage under Section 11A cannot be maintained merely because the intermediate goods were valued or cleared separately.

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