2006 (4) TMI 303 - AT - Central Excise

Destroyed goods - Excisability of - Demand - Destruction during sample test - Dutiability - Marketability

Summary

Issues:
Revenue's appeal against Order-in-Appeal No. 84/2005 - Central Excise duty on Detonators drawn as samples for testing.

Analysis:
The case involved the Revenue appealing against the Order-in-Appeal No. 84/2005 regarding the imposition of Central Excise duty on Detonators drawn as samples for testing. The Respondents, manufacturers of Detonators, were accused of not paying the duty on samples drawn for conducting various tests. The Original authority confirmed the duty and imposed a penalty, which was appealed by the Respondents and allowed by the Commissioner (Appeals).

The Revenue's grounds for appeal included citing the Apex Court decision in a similar case involving Cigarettes sent for quality control tests. The Revenue argued that the duty liability arises after the goods have attained the finished goods stage and subsequent clearances. The Respondents were required to maintain proper accounts of samples drawn for testing and pay appropriate duty unless exempted by a notification.

The Respondents, represented by their Advocate, argued citing various case laws where goods were considered fully manufactured only after passing quality control tests, thus not liable for duty. They highlighted the destruction of samples during testing within the factory premises and the non-leviability of duty on such destroyed samples. The Advocate also referenced the Explosives Act, stating that Detonators cannot be considered fully manufactured or marketable until testing is completed.

The Tribunal, after careful consideration of the facts and legal arguments presented, upheld the Order-in-Appeal. They emphasized the distinction between the present case and the Apex Court decision involving Cigarettes, where proper accounts were not maintained. The Tribunal agreed with the Respondents that the duty is not sustainable on samples destroyed during testing when proper accounts are maintained. The decision was also supported by the Explosives Act's requirements regarding the sale of deteriorated or defective explosives. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the legality of the Order-in-Appeal.

In conclusion, the Tribunal's judgment highlighted the importance of maintaining proper accounts of samples drawn for testing and the non-leviability of duty on destroyed samples when such accounts are in place. The decision aligned with previous case laws and statutory provisions, ultimately leading to the dismissal of the Revenue's appeal.

(Pronounced in the court on 25-4-2006)