CCE Vs. FLEX CHEMICALS LTD.

JUDGEMENT

(1.) REVENUE filed this appeal against the impugned order whereby Commissioner (Appeals) set aside demand on the ground that respondent cleared the same goods after remaking under Rule 173 -H of Central Excise Rules.

(2.) THE respondents are engaged in the manufacture of polyester chips and cleared certain quantity of chips on payment of duty. Certain quantity of chips was received back from their customer during the period October to December 1998. Thereafter, in the month of January 1999 the returned goods were cleared without payment of duty. Show -cause notice was issued to the respondent demanding duty in respect of clearances made in January 1999 under Rule 173H of rules on the ground that they had cleared polyester chips of different grade then what was received back and the fresh goods have been removed without payment of duty under guise of received goods.

(3.) THE contention of the respondent is that as per the provisions of Rule 173H the manufacturer is permitted for re -made, refined, reconditioned, repaired or subjected to any similar process in respect of duty paid goods received in the factory. In the present case the respondent has done some remaking of the chips resulting in the change of grade. The contention is that chips which emerged as a result of remaking continue to be polyester chips classifiable under the same tariff heading. The contention is that as the goods in question falls within the process provided under Rule 173H, no duty can be demanded at the time of clearance of the same goods without payment of duty. The contention is also that change or upgradation of the goods cannot be taken to be manufactured of new product for the purposes of excise duty.