Factory-retained control samples escape excise duty until clearance, if proper accounts are maintained

Control samples of medicines retained in the factory are not chargeable to central excise duty so long as they are not cleared from the factory and proper accounts are maintained. The Excise Manual and supplementary instructions allow samples drawn for laboratory testing or complaint investigation to remain in the factory without duty, provided records of receipt and utilisation are kept. Duty arises only on clearance from the factory, and any intended destruction must follow the prescribed procedure.

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Issues: Whether control samples of medicines retained in the factory are chargeable to central excise duty so long as they are not cleared from the factory and proper account is maintained.

Analysis: The Basic Excise Manual and the Supplementary Instructions clarified that samples drawn for laboratory testing and preservation for investigation of complaints may be retained in the factory without duty, provided proper records of receipt and utilisation are maintained. The instructions further indicated that duty becomes chargeable only when such samples are cleared from the factory, and that destruction, if intended, must follow the prescribed procedure. On that basis, samples kept merely for control purposes and not removed from the factory do not attract duty under the deemed clearance concept in the excise rules.

Conclusion: Control samples retained in the factory are not chargeable to duty until they are cleared from the factory, subject to maintenance of proper accounts.

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