CEA No.28 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CEA No.28 of 2006 DATE OF DECISION: May 18, 2010 COMMISSIONER OF CENTRAL EXCISE ...PETITIONER COMMISSIONERATE, JALANDHAR VERSUS M/S RANBAXY LABORATORIES LTD. ...RESPONDENT NAWANSHAHAR CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR. PRESENT: MR. SANJEEV KAUSHIK, SR.STANDING COUNSEL FOR THE PETITIONER. MR. M.P. DEVNATH, ADVOCATE FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J. The Commissioner of Central Excise Commissionerate, Jalandhar has filed the present appeal impugning the orders (Annexure P-2) passed by the Commissioner (Appeals), Central Excise, Ludhiana and the order (Annexure P-3) passed by the the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal') vide which it was held that the processes carried out by the manufacture-appellant on the duty paid finished goods received under Rule 173H of the Central Excise Rule (for short 'the Rules') do not amount to manufacture of new product and accordingly, no duty is demandable from the manufacture. Briefly, the facts of the case are that the respondent, M/s Ranbaxy Laboratories Ltd. is engaged in the manufacture of various bulk CEA No.28 of 2006 -2- drugs falling under Chapter 29 of the Schedule to the Central Excise Tariff, 1985. The respondent was clearing the goods to their buyers after payment of the requisite duty. It was observed that the respondent was receiving back some of their goods from their buyers as 'rejected' under Rule 173H of the Rules and was clearing the same to their customers after carrying out processes, without payment of duty, under Rule 173H of the Rules. The adjudicating authority was of the opinion that the so-called rejected goods were reprocessed and it amounted to manufacture of the goods and hence the respondent was liable to pay duty on the reprocessed goods. Accordingly, a show cause notice was served upon the respondent by the adjudicating authority. Replies were filed by the respondent. However, the adjudicating authority vide order Annexure P-1 confirmed the demand of central excise duty amounting to Rs.1,04,000/- against the noticee under Section 11A of the Central Excise Act alongwith interest due thereon. An equal amount of penalty was also imposed on the noticee under Rule 173Q of the Rules. Being aggrieved, the noticee filed an appeal before the Commissioner (Appeals) wherein it was contended that reprocessing of the rejected drugs does not amount to fresh manufacture and hence the noticee was not liable to pay any duty. The Commissioner (Appeals) accepted the plea of the noticee and set aside the order passed by the adjudicating authority and held that the processes carried out by the noticee on the duty paid finished goods do not amount to manufacture of new product. The Revenue filed an appeal before the Tribunal which upheld the order passed by the Commissioner (Appeals) vide order Annexure P-3. The short question that arise in the present appeal is as under:- CEA No.28 of 2006 -3- “Whether the processes of re-labelling, repacking, re-blending, alongwith other physical processes liking milling, blending, sifting, washing etc. and chemical processes like solvent treatment undertaken by the assessee in their factory amounts to manufacturer as per Chapter Note 11 of Chapter 29 of the Central Excise Tariff, 1985 and therefore, chargeable to Central excise duty” A perusal of the aforementioned facts clearly shows that the respondent had sold the bulk drugs to their buyers after paying the requisite duty. However, as the goods were received back as 'rejected', therefore, the same were reprocessed and again sold. It is a settled principle under the law that central excise duty cannot be charged on the same goods twice. In the present case, the duty had been paid on the goods after their initial manufacture and as some defect was found in the supplied goods, therefore, the same were returned by the buyers to the manufacture to reprocess the goods. Obviously, the Department could not charge duty for the second time in the reprocessed goods. In Collector of Central Excise Baroda vs. Raj Kamal Synthetics Ltd., reported as 1999(105) ELT 373, it was held as under:- “The expression refinishing used by the assessee indicates that the goods were already finished. In the show cause notice too there is no allegation that goods received under Rule 173H of Central Excise Rules, 1944 were not duty paid finished goods. Once the goods received under Rule 173H are admitted to be finished goods refining done by the processes mentioned in Section 2(f) of Central Excise Act, 1944 and chapter note 3(d) CEA No.28 of 2006 -4- of Chapter 54 of Central Excise Tariff Act, 1985 would not amount to manufacture of new product. Demand not sustainable.” In view of the above, the processes carried out by the respondent on the duty paid finished goods which were received back by them being rejected would not amount to manufacture and hence no duty was payable by the respondent on the reprocessed goods. In view of the above, the question of law as posed in this appeal is decided against the Revenue and in favour of the assessee. Accordingly, we uphold orders passed by the Commissioner (Appeals) as well as by the Tribunal and the present appeal is dismissed. (ASHUTOSH MOHUNTA) JUDGE May 18, 2010 (MEHINDER SINGH SULLAR) Gulati JUDGE