Duty on testing samples and suppression of sample clearance justified the extended limitation period.

Samples drawn from finished goods for quality testing are dutiable at the stage of removal when they are not returned to production, and samples merely preserved in the factory remain duty-free until actual clearance. Applying the Board's instructions under Rule 31 of the Central Excise Rules, the tribunal upheld duty on the samples because they were removed for testing and not brought back into production after examination. Non-disclosure of the drawal and clearance of samples was treated as suppression of material facts, so the extended period of limitation was sustained.

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Issues: (i) Whether duty was payable on preservative samples drawn from finished goods and cleared from the factory after quality testing and preservation; (ii) whether the extended period of limitation was validly invoked.

Issue (i): Whether duty was payable on preservative samples drawn from finished goods and cleared from the factory after quality testing and preservation.

Analysis: The samples were drawn from each roll for quality control and were also preserved for future reference. The Board's supplementary instructions under Rule 31 of the Central Excise Rules required duty to be paid on samples drawn for testing before removal, with invoice and stock-account entries, while samples merely preserved in the factory could remain duty-free until clearance. On the facts, the samples were not only preserved but were also used for testing, and the authority distinguished the precedent relied upon by the assessee because, unlike that case, the samples here were not brought back into production after testing. The conclusion was reinforced by the principle that samples removed for testing are chargeable to duty at the stage of removal.

Conclusion: Duty was payable on the samples before their removal for testing, and the demand was upheld.

Issue (ii): Whether the extended period of limitation was validly invoked.

Analysis: The Department was not informed about the drawal and disposal of samples until the issue surfaced during audit. The non-disclosure of the manner of sample clearance was treated as suppression of material facts, and later conduct was treated as supporting an inference of intent to evade duty. On that basis, invocation of the extended period was sustained.

Conclusion: The extended period of limitation was validly invoked against the assessee.

Final Conclusion: The assessee's challenge failed on both the duty liability on samples and the limitation objection, so the impugned orders were sustained.

Ratio Decidendi: Samples drawn for quality testing are dutiable at the stage of removal when they are not returned to production, and non-disclosure of their drawal and clearance can justify invocation of the extended limitation period.

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