Duty on sample-tested goods was unsustainable where destruction during acceptance testing fell within intended use and handling loss.

Track shoes cleared under a notification and Chapter X procedure were not liable to duty where some quantities were destroyed during sample testing at the recipient's factory. The goods were entered in the RG 1 register, the contract provided for payment even for samples destroyed in testing, and the testing was only for acceptance of the parts, not for determining whether they were manufactured. The notification's requirement that the parts be "intended for use" was satisfied because the goods had no alternative use and were meant only for battle tanks. Rule 192 was also read broadly enough to cover loss during testing-related handling, so the duty demand was unsustainable.

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Issues: Whether duty was payable on track shoes cleared under the notification and Chapter X procedure when some quantities were destroyed during sample testing at the recipient's factory.

Analysis: The goods had been entered in the RG 1 register, the contract contemplated payment even for samples destroyed during testing, and the testing at the buyer's end was for acceptance of the parts and not for deciding whether the goods were manufactured. The notification required the parts to be "intended for use", which was satisfied as the goods had no alternative use and were meant only for battle tanks. Rule 192 also recognized loss during handling, and that expression was wide enough to include testing-related destruction.

Conclusion: The duty demand was not sustainable and the clearance of the goods did not attract duty despite destruction during sample testing.

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