Excise duty on finished cigarette sticks sent for testing remains payable; destruction during testing must be proved by reliable records.

Cigarette sticks were treated as excisable goods once manufacture was complete and the product was marketable; the later packing requirement for sale or clearance did not defer duty. Goods removed within the factory for quality-control testing remained liable to excise duty because they had already emerged as finished, consumable products. Although destruction during testing can remove the duty burden on the destroyed quantity, that exemption depends on reliable proof and proper records. On the facts described, the absence of credible accounts meant the quantity sent for testing was treated as dutiable.

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Issues: (i) Whether cigarettes removed to the quality control laboratory within the factory for testing were excisable goods liable to excise duty; (ii) whether cigarette sticks destroyed during the testing process were liable to excise duty.

Issue (i): Whether cigarettes removed to the quality control laboratory within the factory for testing were excisable goods liable to excise duty.

Analysis: Liability under the excise law turns on manufacture of excisable goods and their marketability. Cigarette sticks emerged as a finished, consumable product before they were sent for testing, and the later packing requirement under the tobacco-product rules was held to relate to sale and clearance, not to the completion of manufacture. The Court distinguished cases involving intermediate products that were not yet marketable and held that the manufactured cigarette sticks were complete goods known to the market.

Conclusion: The cigarette sticks sent for testing within the factory were liable to excise duty.

Issue (ii): Whether cigarette sticks destroyed during the testing process were liable to excise duty.

Analysis: The Court accepted that goods actually destroyed in the course of testing would not attract duty, but held that no reliable accounts or evidence were produced to establish the extent of destruction. In the absence of proof and in view of the admitted non-maintenance of proper accounts, the entire quantity sent for testing was treated as dutiable.

Conclusion: No exemption from excise duty was allowed for the alleged destroyed quantity on the facts proved.

Final Conclusion: The levy of excise duty on the cigarette sticks sent for quality-control testing was upheld, and the appeals failed.

Ratio Decidendi: For excise purposes, goods are dutiable once manufacture is complete and the goods are marketable; packing required for clearance or sale does not defer manufacture, and exemption for alleged destruction during testing must be proved by reliable records.

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