2019 (7) TMI 457 - AT - Central Excise

Taxability/Excisability - samples which are withdrawn for testing within the factory premises - HELD THAT - Reliance placed in the case of THERMAX CULLIGAN WATER TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE 2013 (12) TMI 977 - CESTAT MUMBAI where it was held that samples mandatorily drawn for testing and getting used up/destroyed during testing cannot be considered as excisable goods liable to duty. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand of Central Excise duty on samples withdrawn for testing within factory premises.

Analysis:
The appellant, a pharmaceutical company, argued that samples withdrawn for testing are not marketable until tested, citing various precedents. They emphasized that testing is mandatory before goods can be sold, maintaining that samples are consumed within the factory and are not for sale. The appellant also claimed entitlement to Notification No. 67/95-CE for samples used in manufacturing finished goods.

The Revenue relied on the decision of the Hon'ble Apex Court in the case of ITC Limited, asserting that marketability determines duty liability. However, the appellant distinguished the applicability of this decision to pharmaceutical products, where testing is crucial for marketability. The Tribunal's decision in Glaxo Smithkline Pharmaceuticals Limited further supported the appellant's argument that marketability differs based on the product type.

Regarding controlled samples, the Tribunal's decision in Thermax Culligan Water Technologies Limited clarified that samples drawn for testing and consumed during testing are not subject to excise duty. The Tribunal emphasized the importance of maintaining records and evidence of sample destruction to determine duty liability accurately.

Ultimately, the Tribunal found merit in the appellant's arguments, aligning with the decisions in Glaxo Smithkline Pharmaceuticals Limited and Thermax Culligan Water Technologies Limited. Consequently, the appeals were allowed, emphasizing the distinction in marketability and regulatory requirements for pharmaceutical products compared to other commodities.

The judgment highlights the significance of testing in determining marketability for excise duty liability, emphasizing the specific nature of pharmaceutical products and the necessity of maintaining accurate records for controlled samples. The Tribunal's analysis of relevant precedents and regulatory frameworks demonstrates a nuanced approach to assessing duty liability for samples withdrawn for testing within factory premises.