2007 (7) TMI 145 - AT - Central Excise

Samples drawn of Bulk Drugs before the RG 1 stage Test to be carried out are mandatory so part of samples may be destroyed and consumed in the course of testing Samples are retained in the factory Marketability stage is reached only after samples are testes Duty not imposable

Summary

Issues:
1. Demand of duty on samples drawn for testing.
2. Applicability of duty on samples drawn before RG1 stage.
3. Interpretation of Tribunal decisions on duty liability for samples.

Analysis:

Issue 1: Demand of duty on samples drawn for testing
The appeals were filed against Orders-in-Appeal confirming demands for duty on samples drawn for testing. The Original Authority and Commissioner (Appeals) upheld the demands, imposing penalties and interest. The issue was whether duty is leviable on samples drawn mandatorily for testing. The Tribunal cited various decisions, including Commissioner of Central Excise, Hyderabad v. Gulf Oil Corporation Ltd., holding that no duty is leviable on samples drawn for testing purposes.

Issue 2: Applicability of duty on samples drawn before RG1 stage
In another appeal, the Revenue challenged the Order-in-Appeal confirming demand for duty on samples drawn for testing within the factory. The Revenue argued that duty should be collected on samples before removal for test purposes. However, the Commissioner (Appeals) followed Tribunal decisions, stating that no duty is demandable on samples drawn for mandatory testing. The Tribunal held that duty cannot be demanded on goods consumed during testing or retained in the factory before reaching the marketable stage.

Issue 3: Interpretation of Tribunal decisions on duty liability for samples
The Tribunal considered the mandatory testing requirements for Bulk Drugs under the Drugs and Cosmetics Act. It clarified that duty cannot be demanded on samples drawn for mandatory testing, as per Tribunal rulings and Board's Instructions. The Tribunal emphasized that a product is not excisable until it is marketable, which occurs after testing. Therefore, no duty can be demanded on goods used for testing purposes. The Commissioner (Appeals) rightly followed Tribunal decisions, dismissing the Revenue's appeal for lack of merit.

In conclusion, the Tribunal allowed the appeals against duty demands on samples drawn for testing, citing relevant case laws and clarifying the non-leviability of duty on such samples. The judgments emphasized the importance of mandatory testing and the non-excisability of goods until they reach the marketable stage post-testing. The Commissioner (Appeals) decisions were upheld, affirming the legal and proper application of duty liability in the cases at hand.