Returned goods after testing failure: no immediate duty demand or penalty, subject to stock entry and future duty on clearance

Goods sent for testing for defence production and returned after failing the test were not treated as immediately liable to duty demand and penalty in the manner sought by the Department. The material was directed to be inspected by the jurisdictional Superintendent and entered in RG-I stock, with duty to be paid when the stock is cleared from the factory in future. Relief was therefore granted subject to proper stock accounting and payment on subsequent clearance.

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Issues: Whether the goods returned after failing testing for defence production were liable to immediate duty demand and penalty, and the manner in which the stock was to be accounted for.

Analysis: The goods were found to have been sent for testing for defence production and returned after failing such testing. In these facts, the matter was viewed with leniency. The material was directed to be inspected by the jurisdictional Superintendent and the quantity was to be entered in the RG-I stock. Duty was to be paid when the stock was cleared from the factory in future.

Conclusion: The immediate duty demand and penalty were not sustained in the manner sought by the Department, and the assessee was granted relief subject to compliance with stock accounting and duty payment on future clearance.

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