Excise duty on in-factory control samples is not payable when samples are properly accounted for and never cleared out.

Control samples drawn for laboratory testing and retained or destroyed within the factory were treated as not liable to excise duty where they were not cleared out and were properly accounted for. The Tribunal followed the Larger Bench ruling in Dabur India Ltd., as approved by the High Courts, and distinguished the contrary Revenue authorities, treating one as per incuriam for ignoring the binding view. On that basis, the demand of duty, interest, and penalty could not be sustained.

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Issues: Whether excise duty was payable on samples drawn for quality control and retained or destroyed within the factory, and whether the consequent demand, interest, and penalty were sustainable.

Analysis: The Tribunal held that the issue was covered by the Larger Bench decision in Dabur India Ltd., as approved by the High Courts, which recognised that samples drawn for laboratory testing and preservation of complaints, when maintained within the factory and not cleared out, are not chargeable to duty so long as proper account is maintained. The contrary decisions relied upon by the Revenue were distinguished, and one was treated as per incuriam for having ignored the binding Larger Bench view. Since the appeals were decided on merits in favour of non-dutiability of such samples, the Tribunal did not go into the remaining grounds.

Conclusion: Excise duty was not payable on the control samples retained or destroyed within the factory, and the demand of duty, interest, and penalty could not be sustained.

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