Excise duty on internal test samples was unsustainable where no record-entry requirement existed and the demand was time-barred

Duty could not be demanded on samples drawn at the loom stage for internal testing where the samples were taken before the relevant excise accounting point, a sample register was maintained, officers regularly verified the records, and the leftover material was returned for re-processing. In the absence of any trade notice or instruction requiring such samples to be entered in the prescribed excise records, there was no basis for duty demand. The demand was also held time-barred because it was raised much later for the period in question and had not been effectively confirmed earlier. Refund was therefore due to the assessee.

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Issues: Whether duty could be demanded on samples drawn at the loom stage for internal testing, and whether the demand was barred by time in the absence of any trade notice or instruction requiring such samples to be accounted for in the prescribed excise records.

Analysis: The samples were drawn before the stage at which the relevant excise return/accounting point arose for jute products. The assessee maintained a sample register, the samples were regularly verified by excise officers, and the left-over material after testing was returned for re-processing. In the absence of any trade notice or instruction requiring the samples drawn at the loom stage to be entered in the relevant records, there was no basis for demanding duty. The demand was also treated as time-barred, since it was raised much later for the period in question and had not been effectively confirmed earlier.

Conclusion: The demand was unsustainable and barred by time, and the assessee was entitled to refund.

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