2007 (7) TMI 58 - AT - Central Excise

Manufacturers win appeal on duty payment for ISI-tested Razor Blades

The appeals were allowed in favor of the manufacturers of Doubled Edged Safety Razor Blades, holding that samples drawn for testing to comply with ISI ... Excise liability on samples destroyed during mandatory quality testing - Testing as prerequisite for marketability - Destructive testing not attracting duty - Application of CBEC Manual of Supplementary InstructionsExcise liability on samples destroyed during mandatory quality testing - Testing as prerequisite for marketability - Destructive testing not attracting duty - Application of CBEC Manual of Supplementary Instructions - Samples of finished goods cleared for mandatory inhouse quality testing and destroyed in the course of such testing are not liable to excise duty. - HELD THAT: - The Tribunal accepted the appellants' submission that finished products must undergo mandatory inhouse testing to ensure compliance with prescribed standards before they become marketable. Testing in the present case was destructive in nature and was an essential step to render the goods fit for sale. Although the Revenue relied on the Board's instructions in the CBEC Manual of Supplementary Instructions and the Commissioner (Appeals) applied those instructions and remanded for requantification, the Tribunal held that the established principle - that goods destroyed in mandatory quality control tests are not chargeable to excise duty - governs the matter. The Tribunal expressly followed the reasoning in earlier decisions holding that testing is integral to making products marketable and that quantities destroyed during such testing do not attract duty, thus overriding the revenue's reliance on the Manual for imposing duty in these circumstances. Applying that principle to the facts, the Tribunal concluded that duty was not leviable on the samples drawn for mandatory testing. [Paras 5]Appeals allowed; samples cleared for mandatory testing and destroyed in testing are not liable to excise duty; consequential relief granted.Final Conclusion: The Tribunal allowed the appeals, holding that samples of finished products removed for mandatory destructive quality testing do not attract excise duty despite the Revenue's reliance on CBEC Manual instructions, and granted consequential relief. Issues:Stay petitions appeals against Orders-in-Appeal regarding excisability of samples drawn for testing.Analysis:The appellants, manufacturers of Doubled Edged Safety Razor Blades, drew samples for testing to comply with ISI specifications. The Revenue proceeded against them citing CBEC's Central Excise Manual of Supplementary Instructions. The lower authority found the appellants not liable to pay duty on samples drawn, but the Revenue appealed to the Commissioner (Appeals) based on Board's Instructions, who held the samples liable for duty and remanded the matter for re-quantification. The issue was argued to be covered by a Tribunal decision in a similar case.Considering the matter, it was highlighted that finished products must be tested for quality and standards before marketability. Referring to a Tribunal decision, it was emphasized that testing is essential for making goods marketable, and products cannot be sold without testing. Citing a Supreme Court case, it was established that goods destroyed in quality control testing are not liable for excise duty. Thus, it was concluded that samples cleared for mandatory testing are not subject to duty payment, leading to the allowance of the appeals with consequential relief.The judgment was pronounced in open court, and the learned Advocate's request for issuing the order by hand was considered, directing the Registry to expedite the issuance of the order.