2007 (11) TMI 520 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are whether samples removed for testing to laboratories are liable for duty, the applicability of statutory provisions on testing, and the duty liability on samples drawn for testing purpose within the factory.

Issue 1: Samples removed for testing to laboratories are liable for duty
The Commissioner (Appeals) confirmed demands and penalties on the ground that samples removed for testing are liable for duty. The appellant contended that testing was mandatory under Drugs and Cosmetics Rules, 1945, and relied on various judgments. However, the plea was not accepted based on a Tribunal ruling in the case of M/s. Vera Laboratories Limited. The Tribunal, in a separate case, distinguished the judgment of M/s. Vera Laboratories Ltd. and held that samples removed for mandatory testing are part of the manufacturing process and not liable for duty.

Issue 2: Applicability of statutory provisions on testing
The Tribunal considered the mandatory nature of testing under statutory provisions and held that duty is not liable on samples drawn for testing purpose within the factory if testing is done in terms of statute. The Tribunal cited several decisions supporting this view and allowed the appeals based on the same.

Issue 3: Duty liability on samples drawn for testing within the factory
The case involved manufacturers of Bulk Drugs and Drug Intermediates who stopped paying duty on samples drawn for testing within the factory. The Revenue contended that duty should be collected on samples before their removal for test purposes unless exempted by notification. The Tribunal, after considering the mandatory nature of testing under the Drugs and Cosmetics Act, 1945, and various Tribunal rulings, held that no duty can be demanded on samples drawn for mandatory testing or retained in the factory. The impugned order of the Commissioner (Appeals) was upheld based on Tribunal decisions and statutory provisions.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing that duty is not demandable on samples drawn for mandatory testing and those retained in the factory, in line with statutory provisions and Tribunal rulings.