2007 (1) TMI 43 - AT - Central Excise

Valuation(Central Excise) Sample sent for quality control test and thereafter the same being destroyed Held that the value of sample which were removed without payment of duty is required to be added in the cost of products cleared on assessment

Summary

Issues: Valuation of physician's samples, destruction after quality control test, applicability of Larger Bench judgment, distinction from valuation aspect

In this judgment by the Appellate Tribunal CESTAT, Bangalore, the issue at hand involves the valuation of physician's samples taken for quality control tests and subsequently destroyed. The Tribunal notes that the Revenue had cited a Larger Bench judgment in the case of Blue Cross Laboratories Ltd. v. CCE, Mumbai, stating that the value of such samples removed without duty payment should be added to the cost of cleared products. However, the assessees argue that this case pertains to valuation and not the removal and destruction of samples for testing. The Tribunal agrees with the assessees, emphasizing that the final product is not marketable until the quality control tests are conducted. The judgment also references a case involving ITC Ltd., where the Apex Court ruled that products destroyed during quality control tests are not liable for excise duty. The Tribunal further highlights that maintaining proper accounts of destroyed goods during testing is crucial, as evidenced by decisions from other benches. Ultimately, the Tribunal upholds the Order-in-Appeal, dismissing the Revenue's appeal as lacking merit and following the precedent set in the assessees' own case.

This judgment serves to clarify the distinction between the valuation of samples and the destruction of samples after quality control tests. It underscores the importance of proper record-keeping in cases where goods are destroyed during testing, as exemplified by the ITC Ltd. case. The Tribunal emphasizes that the marketability of products is contingent on successful quality control tests, and the destruction of samples in this process does not attract excise duty. By referencing relevant legal precedents and decisions, the Tribunal reinforces the legality and propriety of the Order-in-Appeal, ultimately dismissing the Revenue's appeal based on the established legal principles and the specific circumstances of the case.