1987 (5) TMI 149 - AT - Central Excise

Summary

Issues:
- Appeal against the order of Collector of Central Excise (Appeals) regarding duty demand on P.C.C. Poles drawn for test.
- Interpretation of Rule 9 and Rule 49 for levy of excise duty on goods drawn for test within the factory premises.
- Whether remission of duty is permissible for goods drawn for testing without specific notification.

Analysis:
The case involved an appeal against the order of Collector of Central Excise (Appeals) regarding the duty demand on P.C.C. Poles drawn for test within the factory premises. The appellants manufactured P.C.C. Poles as per a contract with U.P. Electricity Board, where 1% of the poles were to be tested by technicians of the Board. The dispute arose when the Excise authorities demanded duty on poles drawn for test beyond the 1% limit specified in the contract. The Collector (Appeals) partially allowed the appeal, restricting the duty demand to poles drawn for test over 1%. The appellants sought total remission of duty for all poles drawn for test, while the Revenue contended that no remission was warranted by law.

The main argument presented by the appellants was that the poles drawn for test did not meet the conditions for levy of duty under Rule 9 and Rule 49, as they were not removed from the factory premises, consumed in the factory, or utilized for manufacturing another commodity. They cited precedents to support their claim for remission based on non-marketability of the tested poles. Conversely, the Revenue argued that no permission was granted for testing samples, and duty remission was only permissible under Rule 49 in specific circumstances like loss by natural causes or unavoidable accidents during handling or storage.

The key issue for consideration was whether duty liability arises on goods drawn for test within the factory premises without a specific notification. The Tribunal analyzed the relevant provisions of the Central Excises & Salt Act, 1944, focusing on Section 3 for duty levy and Rules 7, 9, 47, and 49 for duty collection. The Tribunal emphasized that once goods are manufactured, a duty charge is created, and duty payment is postponed until removal from the storage premises. The Tribunal clarified that duty must be paid when goods are removed from the storage place, except for cases covered by exemption notifications. The judgment highlighted that the duty charge is not extinguished by postponement rules and duty remission is only applicable in specific scenarios outlined in Rule 49.

Ultimately, the Tribunal held that in the absence of an exemption notification, the Collector (Appeals) erred in allowing remission for poles drawn for test, as they did not meet the criteria for duty remission under Rule 49. The appeal of the appellants was rejected, and the plea of the Revenue was allowed, setting aside the previous order of the Collector (Appeals).