Duty on quality control samples turns on marketability after testing, with consequential demand and penalty set aside.

Samples of ABS polymers drawn for quality control testing were treated as not independently dutiable before completion of laboratory examination, inspection, and grading. The text applies the principle that excise duty arises only when goods reach the stage of marketability after the prescribed manufacturing and quality control process is complete, so removal of samples for testing did not attract duty. On that basis, the consequential duty demand and related penalty were set aside.

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Issues: Whether duty was leviable on samples of ABS polymers drawn for quality control testing and whether the consequential demand and penalty could be sustained.

Analysis: The RG I stage for resins and plastics was treated as arising only after completion of laboratory tests, inspection, and assignment of grade. On that basis, and following the principle that goods become liable only when they reach the stage of marketability after prescribed quality control testing, the samples drawn for testing were held not to be dutiable at the stage of removal for laboratory examination.

Conclusion: Duty was not payable on the samples drawn for testing, and the duty demand was set aside. As the demand itself failed, the penalty imposed under the excise provisions was also set aside, in favour of the assessee.

Ratio Decidendi: Where the prescribed manufacturing stage is completed only after quality control testing and inspection, samples drawn for such testing are not independently liable to duty before they attain the stage of marketability.

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