Tribunal rules in favor of appellant on Cenvat Credit and duty liability issues.

The tribunal ruled in favor of the appellant on all three issues. They allowed the utilization of Cenvat Credit for payment of duty on goods procured under a specific notification, granted entitlement to Cenvat Credit for inputs and packing materials used in the manufacture of exhibit batches subsequently destroyed, and held that goods cleared for testing and sampling purposes were not liable for duty. The tribunal set aside the impugned order, with the appeal allowed and consequential relief granted.

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Issues Involved:
1. Utilization of Cenvat Credit for payment of duty on goods procured under Notification No. 43/2001-CE (NT).
2. Entitlement to Cenvat Credit for inputs and packing materials used in the manufacture of medicament (exhibit batches) subsequently destroyed.
3. Liability to pay duty on goods cleared from the factory on non-returnable challans for testing and sampling purposes.

Issue-Wise Detailed Analysis:

1. Utilization of Cenvat Credit for Payment of Duty:
The primary issue was whether the duty on goods procured under Notification No. 43/2001-CE (NT) could be paid using Cenvat Credit. The tribunal referenced previous decisions, including Shree Rajasthan Syntex Ltd. and Ginger Clothing Pvt. Ltd., which permitted the payment of duty on such goods through Cenvat Credit. The tribunal concluded that there is no legal prohibition against utilizing Cenvat Credit for this purpose, thus allowing the appellant to pay the duty using Cenvat Credit.

2. Entitlement to Cenvat Credit for Inputs and Packing Materials:
The second issue concerned the appellant's entitlement to Cenvat Credit for inputs and packing materials used in the manufacture of 'exhibit batches' that were subsequently destroyed. The tribunal noted that the raw materials and packaging materials were used in the manufacturing process for trial and testing purposes under the Drugs and Cosmetic Act. This testing is integral to the manufacturing process, as it ensures the marketability and quality of the final product. The tribunal cited several judgments, including Thermax Culligan Water Technologies Ltd. and RPG Life Sciences Ltd., which supported the view that materials used in testing are considered inputs used in manufacturing. Consequently, the tribunal held that the appellant is entitled to Cenvat Credit for these materials.

3. Liability to Pay Duty on Goods Cleared for Testing and Sampling:
The third issue addressed whether the appellant was liable to pay duty on goods cleared from the factory on non-returnable challans for testing and sampling purposes. The tribunal found that these goods, sent for testing under the Drugs and Cosmetics Act, did not qualify as 'manufactured' since they were not marketable. The tribunal referred to several decisions, including those in the cases of Sahwala Cylinders (P) Ltd. and Bhansali Engg. Polymers Ltd., which consistently held that samples drawn for quality control testing are not subject to excise duty. Therefore, the tribunal concluded that the samples cleared for testing and quality control are not liable for excise duty.

Conclusion:
The tribunal set aside the impugned order, ruling that no demand was sustainable. The appeal was allowed with consequential relief, if any. This judgment was pronounced in the open court on 18.10.2022.

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