1987 (1) TMI 343 - AT - Central Excise

Summary

Issues:
- Interpretation of Central Excise Rule 49 regarding duty liability of excisable goods removed within the factory for testing.
- Application of the second proviso to Rule 49 on goods rendered unfit for consumption or marketing.
- Duty liability on goods destroyed during testing within the factory.

Analysis:
The case involved an appeal against an order passed by the Appellate Collector of Central Excise, New Delhi, concerning the duty liability of P.C.C. poles used for testing. The respondents had availed excise duty exemption but used poles exceeding the exemption limit for testing by the Rajasthan State Electricity Board. The dispute centered around whether duty was payable on goods removed within the factory for testing. The Assistant Collector confirmed the duty demand, while the Appellate Collector allowed the appeal based on the timing of duty liability at the time of clearance. The Collector challenged this decision.

The grounds in the appeal highlighted the duty liability of manufactured goods, even if not cleared immediately, as per Rule 49. It was argued that removal of goods for testing within the factory constituted removal for duty purposes. The appeal hearing proceeded in the absence of the respondents, and the appellant reiterated the Collector's stance.

The tribunal deliberated on the duty liability of goods removed within the factory for testing, rendered useless in the process. Rule 49 stipulates duty payment upon removal from the factory, whether within or outside. The second proviso to Rule 49 allows for non-demand of duty on goods unfit for consumption or marketing, subject to conditions imposed by the Collector. In this case, the poles were rendered unfit for use during testing, warranting application of the proviso to exempt duty payment.

One member of the tribunal emphasized the need for an application to the Collector for goods' destruction to extinguish duty liability, which was absent in this case due to destruction during testing. The duty becomes payable upon removal from the factory, which did not occur as the poles were destroyed within the factory during testing, precluding duty demand.

Considering the unique circumstances where the poles were rendered unfit for use during testing within the factory, the tribunal upheld the impugned order, dismissing the appeal. The decision was based on the application of the second proviso to Rule 49, exempting duty on goods unfit for consumption or marketing, and the absence of removal from the factory triggering duty liability.