Excise duty on goods destroyed in mandatory testing was not payable where the test consumed the manufactured cables.

Central excise duty was not payable on cable portions destroyed during mandatory buyer-mandated inspection and quality control testing before acceptance and supply, because goods consumed in a destructive test could not be treated as fully manufactured excisable goods for levy purposes. The Tribunal applied its earlier view, noted that the principle had been affirmed by the Supreme Court, and held that valuation under Section 4 of the Central Excise Act, 1944 did not change the position where no separate value was realised for the destroyed pieces. The levy was therefore unsustainable.

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Issues: Whether central excise duty is payable on cables destroyed while being subjected to mandatory testing before acceptance and supply.

Analysis: The cables were taken out only for the buyer's mandatory inspection and quality control test. The Tribunal followed its earlier view that goods consumed in such a destructive test cannot be treated as fully manufactured excisable goods for levy purposes. It also noted that the ratio had been affirmed by the Supreme Court. The plea based on valuation under Section 4 of the Central Excise Act, 1944 did not alter the position, since no separate value was realised for the pieces destroyed in the testing process.

Conclusion: Excise duty was not payable on the portions of cables destroyed during mandatory testing, and the levy was unsustainable.

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