Testing samples without prescribed removal and utilisation records may face excise duty as goods removed for home consumption.

Unaccounted pharmaceutical samples removed for in-house or external laboratory testing may be treated as removed for home consumption where prescribed records of their value, movement, utilisation or destruction are not maintained. The notes state that failure to comply with the mandatory record-keeping procedure defeats a claim that the samples lacked marketability before in-house testing, while authorities involving properly recorded samples are distinguishable. They further state that a departmental appeal falls within Section 35G of the Central Excise Act, 1944 and is not excluded from the High Court's jurisdiction. The stated effect is that excise duty applies to such unaccounted testing samples and the departmental appeal is maintainable.

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Issues: (i) Whether excise duty was payable on pharmaceutical samples removed for in-house and outside laboratory testing where prescribed records were not maintained; (ii) Whether the Revenue's appeal before the High Court was maintainable under Section 35G of the Central Excise Act, 1944.

Issue (i): Whether excise duty was payable on pharmaceutical samples removed for in-house and outside laboratory testing where prescribed records were not maintained.

Analysis: The undisputed removal of samples for testing, coupled with failure to maintain accounts of their value, movement, utilisation or destruction, attracted the prescribed procedure for removal of samples. In the absence of such records, the samples were liable to be treated as goods removed for home consumption. The claim that the goods had not attained marketability before in-house testing could not prevail after the assessee's failure to maintain the mandatory records. Authorities concerning samples for which proper records were maintained were distinguishable.

Conclusion: Excise duty was payable on the unaccounted testing samples. The issue is decided against the assessee.

Issue (ii): Whether the Revenue's appeal before the High Court was maintainable under Section 35G of the Central Excise Act, 1944.

Analysis: The departmental appeal fell within the scope of Section 35G and was not excluded from its operation.

Conclusion: The Revenue's appeal before the High Court was maintainable. The issue is decided against the assessee.

Final Conclusion: The determination sustaining duty on unaccounted samples and the High Court's jurisdiction to entertain the departmental appeal remain operative.

Ratio Decidendi: Where an assessee removes excisable samples for testing but fails to maintain prescribed accounts substantiating their removal, utilisation or destruction, the samples may be treated as removed for home consumption and subjected to excise duty.

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