Control samples kept in-factory were not dutiable, and penalty failed absent proof of clearance under excise rules.

Excise duty was not leviable on control samples retained in the factory for laboratory or testing purposes, because they were not treated as goods cleared from the premises. The Court accepted the departmental instruction-based view followed by the Tribunal that such in-factory samples do not attract duty while they remain within the factory. Non-entry in the daily stock account register did not, on the facts found, create duty liability or support penalty, since the samples were not shown to have been removed in the manner contemplated by the excise rules. The penalty order therefore did not survive.

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Issues: Whether excise duty and consequential penalty were leviable on control samples withdrawn from the factory and not entered in the daily stock account register.

Analysis: The control samples were retained in the factory for laboratory/testing purposes and were not treated as goods cleared from the factory. The Court accepted the departmental instruction-based view followed by the Tribunal that such samples do not attract duty so long as they remain within the factory premises. The alleged non-entry in the daily stock register did not, on the facts found, create a duty liability or justify penalty, as the samples were not shown to have been cleared out of the factory in the manner contemplated by the relevant excise rules.

Conclusion: Excise duty was not leviable on the control samples, and the penalty order did not survive.

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