2005 (2) TMI 166 - AT - Central Excise

Dutiability of control samples for medicine retained in the factory - HELD THAT - We find that the Basic Excise Manual issued by the C.B.E. C's and the Supplementary Instructions to the Excise Manual from 1-9-2001 clarifies the position that the samples required for laboratory test in the factory and for preservation for investigation of complaints may be allowed to be drawn provided that a proper account of receipts and utilisation in the test in the laboratory is maintained. Manufacturer can preserves the samples of their product for some period for investigation of complaints, if any. No duty should be charged on these samples but an account of such samples should be maintained in the prescribed form. If at any time the manufacturer desires to clear these samples then these should be assessed to duty as applicable. Therefore, the control samples as long as these are kept in the factory and not cleared from there, these will not be chargeable to duty if proper account is maintained. When these samples are cleared for test or for destruction at that time assessment should be made for duty, if any, leviable as per law. Since the reference was made to the Larger Bench only on the issue whether control samples are required to be charged to duty or not when they are retained in the factory, the reference is decided as above. The appeals are sent back to the Division Bench for final disposal.

Summary

Issues:
Dutiability of control samples for medicine retained in the factory.

Analysis:
The appellant argued that control samples retained in the factory are chargeable to duty under Rule 9 and Rule 49 of the Central Excise Rules, 1944, as excisable goods consumed or utilized within the factory are deemed to have been removed. Citing tribunal decisions, the appellant contended that samples retained for control purposes are deemed cleared under the Rules. The absence of an exemption notification was highlighted to support the duty chargeability on such samples. The appellant also emphasized that certain instructions were not applicable for the relevant period of the appeals.

The respondent, on the other hand, referred to the Basic Manual of Departmental Instructions and Supplementary Instructions effective from 1-9-2001, which clarified that no duty is required to be charged on samples retained in the factory for control purposes unless cleared. The respondent relied on tribunal decisions affirming that duty is not applicable to samples kept in the factory for investigation purposes, as long as they are not marketed or consumed.

The tribunal examined the submissions and noted the clarity provided by the Excise Manuals that duty is not chargeable on control samples retained in the factory for testing and investigation purposes. It was emphasized that duty becomes applicable only when such samples are cleared from the factory. The tribunal concluded that as long as the control samples remain in the factory and are not cleared, they are not subject to duty. However, duty assessment is required when these samples are eventually cleared for testing or destruction. The Larger Bench's decision was solely on the duty chargeability of control samples retained in the factory, and the appeals were remanded to the Division Bench for final disposal.