Mandatory destructive testing prevents excise duty where towers are destroyed and only scrap remains after testing.

Central excise duty was not leviable on towers sent out in knocked down condition solely for mandatory destructive testing under the supply contract, because the testing destroyed the towers and only scrap remained. The goods were not finally marketable excisable goods, and manufacture was treated as incomplete until the testing condition was fulfilled. The duty demand, along with interest and penalty, was therefore unsustainable.

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Issues: Whether central excise duty was payable on towers removed for mandatory destructive testing, when the towers were destroyed in the process and returned only as scrap.

Analysis: The towers were sent out in knocked down condition solely for testing required under the supply contract. During testing, they were destroyed and no longer existed as marketable goods; what returned was only scrap. Duty under excise is attracted only on excisable goods, and goods removed for mandatory destructive testing cannot be treated as finally cleared goods where the manufacturing process itself is not complete until the testing requirement is satisfied.

Conclusion: The towers removed for destructive testing were not liable to central excise duty. The demand for duty, interest, and penalty was unsustainable and the appeal succeeded.

Ratio Decidendi: Where goods are removed only for mandatory destructive testing under the contract and are destroyed in the process, no excise duty is leviable because the goods are not finally marketable excisable goods and manufacture is not complete until the testing condition is fulfilled.

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