Exemption for goods lost during testing upheld where testing loss was treated as covered by handling loss under excise rules.

Goods cleared under Rule 196 of the Central Excise Rules, 1944 were treated as continuing to qualify for Notification No. 164/87-C.E. even though they were not actually used, because they were lost during testing. The Tribunal read loss during testing as falling within the expression covering losses during handling, and held that the intended use as original equipment parts did not defeat the exemption where actual use became impossible for that reason. On that basis, no duty was payable and the reference application was rejected for not raising any independent question of law.

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Issues: Whether goods cleared under Rule 196 of the Central Excise Rules, 1944 remained entitled to the benefit of Notification No. 164/87-C.E. when they were not actually used because they were lost during testing.

Analysis: The Tribunal had interpreted Rule 196 to include loss during testing within the expression covering losses during handling. The goods were intended for use as original equipment parts, but they were not actually used because they were lost in testing. On that basis, the Tribunal found that no duty was payable and the reference did not raise any independent question of law.

Conclusion: The benefit of the notification was available, and the reference application was rejected.

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