1999 (10) TMI 158 - AT - Central Excise

Summary

Issues involved: Duty demand on ABS Polymers for quality control testing, penalty imposition under Rule 173Q and Section 11AC of the Central Excise Act, interest under Section 11AB, duty liability on samples sent for testing, limitation period, suppression or concealment of facts, circular of the CBEC regarding duty chargeability on samples, imposition of penalty.

Duty Demand and Penalty Imposition: The Commissioner of Central Excise confirmed a duty demand of Rs. 10,06,185 on ABS Polymers for quality control testing, with a penalty equal to the duty imposed under Rule 173Q and Section 11AC of the Central Excise Act, along with interest under Section 11AB. The appellant contended that duty liability does not arise until the samples are returned to the production unit after testing, citing precedents for products like cigarettes and Dry Cell batteries. The duty demand covered the period from April 1993 to August 1997, with the show cause notice issued on 30th April 1998. The appellant argued that no duty was liable on the samples and that the demand was time-barred, as there was no suppression or concealment of facts regarding sending samples for testing.

Opposing Views and Circular of the CBEC: The appellant's plea to set aside the duty and penalty was opposed by the learned DR, who referred to a circular of the CBEC stating that duty would be chargeable on samples for laboratory tests before removal for testing purposes. The DR defended the duty confirmation, asserting that the demand was raised within time due to suppression by the appellants regarding the removal of samples for testing. The penalty imposition was supported on the grounds of duty liability and suppression by the appellants.

Judgment and Legal Analysis: The Tribunal noted that the RG I stage for resins and plastics is prescribed after completion of laboratory tests, inspection, and assigning the grade. Referring to precedents, it was observed that goods become marketable only after passing the prescribed quality control test. In this case, the prescription of the RG I stage after testing indicated that the goods were fully manufactured only after passing the quality control test. Consequently, duty on samples drawn for testing was deemed not liable, leading to the setting aside of the demand on ABS Polymers removed for testing during the period from April 1993 to August 1997. As the duty demand was annulled, the penalty imposed on the appellants was also set aside, resulting in the allowance of the appeal.