2012 (12) TMI 43 - AT - Central Excise

Demand of duty denial of benefit demand raised and confirmed in respect of destroyed cigarettes alleged that appellant showed excess destruction in the quality control laboratory so as to avoid small amount of duty Held that - Cigarettes meant for quality control test are not liable to duty. It is also on record that cigarettes being sent to the laboratory are being recorded in the statutory records. Mere non maintenance of the destroyed quantity of cigarettes in the laboratory when the appellants are claiming that 100% destructions were made cannot be made the ground for denial of the benefit - demand set aside

Summary

Issues:
1. Duty payment on cigarettes sent for testing.
2. Maintenance of records for destroyed cigarettes in quality control tests.
3. Denial of benefit due to lack of record maintenance.

Issue 1: Duty payment on cigarettes sent for testing
The appellants, engaged in cigarette manufacturing, sent cigarettes for moisture testing without paying duty. The demand for duty on the destroyed cigarettes was raised and confirmed. Referring to a Supreme Court decision, it was established that destroyed cigarettes during quality control tests are not liable for excise duty. The Commissioner observed a lack of evidence regarding the quantity of destroyed cigarettes, leading to the denial of benefits.

Issue 2: Maintenance of records for destroyed cigarettes in quality control tests
The appellants maintained records of cigarettes sent to the in-house quality control laboratory for moisture testing. However, the denial of benefit was based on the absence of specific records showing the quantity of destroyed cigarettes during testing. The appellants argued that all cigarettes sent for testing were destroyed, negating the need for detailed record-keeping.

Issue 3: Denial of benefit due to lack of record maintenance
The appellants contended that as they paid substantial duty on final products daily, there was no intention to evade duty by exaggerating destruction in the quality control lab. Despite the absence of specific records for destroyed cigarettes, the appellants claimed 100% destruction during testing. The Tribunal agreed with the appellants, emphasizing that duty exemption applies to cigarettes used for quality control tests, even if detailed destruction records are not maintained. Consequently, the demand for duty was set aside, and the appeals were disposed of accordingly.