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TMI Blog2016 (6) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... tage. It would appear that the adjudicating authority has been over-zealous in interpreting the provision relating to duty liability on removal to be applicable to all samples because of juxtaposition of sentences. We have no doubt in our mind that drawing of samples and removal of samples are two different events and it is only the latter that calls for discharge of duty liability. To the extent that samples are reintroduced into the production process, they would, undoubtedly, make their way into stock of finished goods and would, in due course, be removed on payment of duty. Even if the samples were to lose their identity and characteristics in testing, the cost of such samples would, in the normal course of business, be absorbed into the finished products which are subject to duty. There is, therefore, no logic in concluding that there is a loss of revenue on account of drawal of samples to the extent that those are retained or tested within the factory of production. Therefore, in view of instruction prescribing duty payment only upon removal from the factory, the ultimate inclusion of the samples or the costs in goods that are cleared from the factory of production and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Accordingly, they are required to be tested at certain prescribed stages of the manufacturing process and samples, drawn from each batch, are to be retained for prescribed periods. The tests are conducted in the 'in-house' laboratory with only minor loss arising therefrom. The substantial portion of material available after testing are put back in the production process as are the control samples after elapse of the prescribed period of retention. Details of the samples drawn are maintained meticulously in the records but, owing to weeding out, was not available for the period to December 2002. 4. The original authority has placed reliance on the circular of Central Board of Excise and Customs No. 1/87-Cx. 6 issued under F. No. 224/7/86-CX.6 dated 15 th January 1987 and further circular no. 1/91-CX.3 dated 4 th January 1991 in relation to taking cigarettes out of the factory of production for quality control tests. It was specifically held that the instructions of the Central Board of Excise and Customs are binding on departmental officers in view of the decision of the Hon'ble Supreme Court in Mahavir Aluminium Ltd. v. Commissioner of Central Excise, Jaipur [199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d instructions do admit that the Central Excise Rules does not contain any specific provision for dutiability of samples drawn for testing. However, as no specific exemption is provided to such samples, the Central Board of Excise and Customs considered it necessary to issue instructions in dealing with samples. We also note that the various categories of samples have been segregated and described; it would appear that they are not all to be treated in the same manner. 9. Manufacturing process requires adherence to quality standards which render sample drawing and testing to be an essential ingredient of manufacture. Undoubtedly, samples could be tested within the factory and outside. It would appear that, in the absence of a specific exemption for samples taken outside the factory premises, they are liable to duty in a manner similar to goods removed from the factory of production. 10. However, samples which are retained in the factory of production for a prescribed period for conformity with standards as well as those which are tested within the factory are not, in effect, removed from the factory and it would appear that these should not be held liable to excise duty at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 2005(182) ELT 185 (Tri.-Del.), does not support the case of the Revenue. In the said case, it was held that, as long as the control samples are kept in the factory and not cleared from there, the same 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. In the present case, the Revenue has not adduced any evidence that the control samples have been removed from the factory and has not been consumed or lost or destroyed during the course of testing. In the absence of any corroborative evidence of removal of these samples from the factory, the demand of duty on such control samples cannot be sustained. 12. The Hon'ble High Court of Bombay in Commissioner of Central Excise v. RPG Life Sciences Ltd. [2011 (264) ELT 346 (Bom.)] has held that: 4. In the present case, the specific case of the assessee is that samples drawn for testing were not cleared out of the factory but were cleared within the factory for testing and that the said samples were consumed in the process of testing. These facts have not been controverted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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