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Issues: (i) Whether samples retained in the factory and batch analysis samples used during testing were liable to central excise duty. (ii) Whether interest under Section 11AB of the Central Excise Act, 1944 could be demanded for a period prior to its introduction.
Issue (i): Whether samples retained in the factory and batch analysis samples used during testing were liable to central excise duty.
Analysis: The retained samples were preserved for investigation of complaints and were required to be maintained in the prescribed records under the relevant excise and drugs-control regime. The batch analysis samples were consumed in mandatory quality-control testing before a medicine batch could be cleared for marketing, and therefore they were not treated as goods cleared after manufacture within the meaning of the excise provisions.
Conclusion: The retained samples and the batch analysis samples were not liable to excise duty.
Issue (ii): Whether interest under Section 11AB of the Central Excise Act, 1944 could be demanded for a period prior to its introduction.
Analysis: Interest under Section 11AB is chargeable only from the date of its insertion. Since the disputed period preceded 28-9-1996, no liability to interest could be fastened for that earlier period.
Conclusion: Interest could not be demanded for the period prior to the introduction of Section 11AB.
Final Conclusion: The manufacturers succeeded on the duty issue, and the revenue's appeals on interest also failed, leaving the adjudication in favour of the assessees on all substantive questions decided.
Ratio Decidendi: Samples retained for prescribed preservation purposes and samples consumed in mandatory pre-clearance testing are not dutiable as manufactured removals, and interest liability cannot be imposed for any period before the charging provision came into force.
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