Quality control testing destroys marketability; tyres lost in BIS compliance testing were held not liable to central excise duty.

Tyres destroyed during in-house testing for quality control and BIS compliance were treated as not marketable for central excise purposes because the testing was necessary before the goods could be sold. Applying the settled principle that goods destroyed in the course of essential quality control testing do not attract duty, the Tribunal held that prior manufacture alone did not make the tyres dutiable. Central excise duty was therefore not chargeable on tyres destroyed during the testing process, and the matter was decided in favour of the assessee.

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Issues: Whether central excise duty is chargeable on tyres destroyed during in-house testing undertaken for quality control and BIS compliance.

Analysis: The tyres were removed for testing in accordance with the BIS manual, and the testing was found to be essential to make the goods marketable. Goods that cannot be sold without such testing are not treated as marketable for excise purposes. Relying on the settled principle that goods destroyed in the course of quality control testing do not attract duty, the Tribunal rejected the contention that the tyres were dutiable merely because they had been fully manufactured before testing.

Conclusion: No central excise duty is chargeable on tyres destroyed in the process of testing. The issue is decided in favour of the assessee.

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