Manufacture by blister packing required fresh adjudication on exemption, testing, return of goods, and carton packing before duty could stand.

Blister packing of bulk capsules into retail packs was treated as manufacture under Chapter Note 5 to Chapter 30 of the Central Excise Tariff Act, 1985, but duty liability could not be sustained without first examining the applicability of Notification No. 214/86-C.E. and the related factual issues. The record also left unresolved whether the blister packs were returned to the first manufacturer, whether testing and control samples were maintained under the Drugs and Cosmetics Rules, 1945, and whether final carton packing occurred at another unit. As these matters were material to exemption and duty liability, the demand and penalties were set aside for de novo adjudication on remand.

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Issues: Whether the demand of duty and penalties arising from blister packing of capsules could be sustained without first determining the applicability of Notification No. 214/86-C.E. and the factual questions relating to testing, return of goods, and further carton packing, or whether the matter required remand for fresh adjudication.

Analysis: The blister packing of bulk capsules into retail packs was treated as manufacture under Chapter Note 5 to Chapter 30 of the Central Excise Tariff Act, 1985. However, the liability of the packed goods depended upon the scope and applicability of Notification No. 214/86-C.E., which had been claimed but not examined by the adjudicating authority. The record also raised unresolved questions on whether the blister packs were returned to the first manufacturer, whether testing and control samples were maintained as required under the Drugs and Cosmetics Rules, 1945, and whether final carton packing took place at the other unit. These factual and legal issues were material to determining duty liability.

Conclusion: The duty demand and related penalties could not be finally upheld on the existing findings and the matter had to be redecided on the relevant factual and exemption issues. The appeals were therefore allowed by way of remand for de novo adjudication.

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