Sample-clearance exemption denied for failure to use distinctive packing and sample marking; duty confirmed and penalty reduced.

Sample-clearance exemption was unavailable because the medicament packs were not packed in a form distinctively different from regular trade packing and were not conspicuously marked as samples not to be sold. Compliance with Drugs and Cosmetics packaging requirements did not excuse failure to satisfy the notification's own conditions, and an administrative letter did not amount to waiver or condonation of past non-compliance. The duty demand was therefore confirmed. On penalty, the underlying breach justified levy, but the amount was found excessive on the facts and was reduced.

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Issues: (i) whether the benefit of the exemption notification was available for medicament samples not packed in a form distinctively different from regular trade packing and not marked as samples not to be sold; (ii) whether the penalty required interference.

Issue (i): whether the benefit of the exemption notification was available for medicament samples not packed in a form distinctively different from regular trade packing and not marked as samples not to be sold.

Analysis: The notification made exemption conditional upon sample packs being distinctively different from regular trade packs and being conspicuously marked as samples not to be sold. The claimed inconsistency with the Drugs and Cosmetics law was rejected because the cited provisions did not prevent a manufacturer from adopting separate packing for samples while still complying with label and container requirements. The administrative letter relied upon by the assessee was also held not to amount to condonation of past non-compliance or to override the notification conditions.

Conclusion: The exemption benefit was rightly denied and the duty demand was upheld.

Issue (ii): whether the penalty required interference.

Analysis: The finding on the substantive breach sustained the penalty, but the Tribunal considered the amount excessive on the facts and exercised restraint by reducing it.

Conclusion: The penalty was reduced from Rs. 50,000 to Rs. 20,000.

Final Conclusion: The duty demand stood confirmed, while the penalty was reduced.

Ratio Decidendi: A sample-clearance exemption conditioned upon distinctive packing and clear sample marking cannot be claimed where those requirements are not met, and compliance with separate regulatory packaging provisions does not excuse non-compliance with the exemption conditions.

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