In-house testing samples cannot attract duty demand or penalties absent suppression, clandestine clearance, or evidence of market removal.

Duty, interest and penalty on samples drawn for in-house testing could not be sustained where the assessee maintained registers showing drawal and disposal, and there was no evidence of market clearance, suppression of records, misstatement or clandestine removal. The absence of an entry showing the date of destruction, by itself, was insufficient to draw an adverse inference. On the facts recorded, the basis for confirming the demand and penal consequences was not established.

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Issues: Whether duty demand, interest and penalty could be sustained on samples drawn for in-house testing where the assessee maintained records and there was no finding of suppression, misstatement or clandestine clearance.

Analysis: The material on record showed that the samples were drawn in the ordinary course for quality control and related testing, and the assessee had maintained registers reflecting the drawal and disposal of such samples. The mere absence of an entry showing the date of destruction, by itself, was insufficient to justify an adverse inference. In the absence of any finding that the samples were cleared or sold in the market, and in the absence of any suppression of records or contumacious conduct, the basis for confirming the demand and related penal consequences was not established.

Conclusion: The duty demand and the associated interest and penalty could not be sustained against the assessee.

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