2007 (8) TMI 128 - AT - Central Excise

Test samples Revenue demanded duty on the samples drawn for testing but appellant plea is that the demand not sustained on the ground that samples are destroyed after testing and it is the mandatory requirement for marketability of the product Held that demand not sustainable

Summary

Issues:
1. Liability of duty on samples destroyed during testing within factory premises.
2. Interpretation of Central Excise Act, 1944 and relevant notifications.
3. Comparison of decisions in ITC Ltd. case and other related judgments.
4. Consideration of duty exemption for samples destroyed during quality control testing.

Analysis:
1. The case involved a dispute regarding the liability of duty on samples destroyed during testing within the factory premises by two companies engaged in manufacturing explosives. The Commissioner (Appeals) set aside the duty demand, stating that since the samples were destroyed during mandatory testing, no duty was payable. The Revenue appealed, arguing that duty should be paid unless exempted by a notification under Section 5A of the Central Excise Act, 1944.

2. The Revenue relied on a Circular stating that duty should be collected on samples unless exempted. They contended that the Supreme Court decision in the ITC Ltd. case clarified that duty is payable on goods even before packing, and destruction during quality control testing does not exempt them from duty. The Tribunal considered various judgments, including the ITC Ltd. case, and held that samples destroyed during quality control testing are not liable to duty.

3. The Tribunal compared the ITC Ltd. case with other decisions, noting that duty exemption applies when samples are destroyed during quality control testing. They highlighted that the duty demand in the present case was due to the lack of separate records of destruction, as evidenced in the ITC Ltd. case. The Tribunal found no merit in the Revenue's appeals, as the duty liability was not established for samples destroyed during testing.

4. The Tribunal's decision was based on the consistent interpretation of judgments, concluding that samples destroyed during quality control testing are not subject to duty. The lack of separate records of destruction led to the duty demand, in line with the principles established in previous cases. Ultimately, the appeals by the Revenue were dismissed, upholding the decision that duty is not payable on samples destroyed during quality control testing within the factory premises.