Reference samples of medicaments were denied exemption and treated as deemed removed when retained in the factory.

Reference samples of P or P medicaments were not eligible for exemption under Notification No. 171/70-C.E. because the required condition of packing them in a form distinctly different from regular trade packing was not satisfied. Drawing and retaining the samples in the factory also amounted to deemed removal under Rules 9 and 49 of the Central Excise Rules, since those provisions, read with their explanations, treat goods manufactured and used or consumed in the place of manufacture as removed; the mandatory retention of samples under the Drugs & Cosmetics Rules constituted such utilisation. The physical integrity or later unsaleability of the samples did not alter that legal consequence.

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Issues: (i) Whether the reference samples of P or P medicaments were entitled to exemption under Notification No. 171/70-C.E.; and (ii) whether drawing and retaining such samples in the factory amounted to removal of excisable goods under Rules 9 and 49 of the Central Excise Rules.

Issue (i): Whether the reference samples of P or P medicaments were entitled to exemption under Notification No. 171/70-C.E.

Analysis: The exemption required the samples to be packed in a form distinctly different from regular trade packing. That condition was not disputed and remained unchallenged. The samples therefore did not satisfy the notification condition for exemption.

Conclusion: The exemption under Notification No. 171/70-C.E. was not available to the reference samples, against the assessee.

Issue (ii): Whether drawing and retaining such samples in the factory amounted to removal of excisable goods under Rules 9 and 49 of the Central Excise Rules.

Analysis: Rules 9 and 49, read with their Explanations, deem goods manufactured and consumed or utilised as such in the place of manufacture to have been removed. The samples were required to be drawn and retained in the factory under the Drugs & Cosmetics Rules for a specified period, which amounted to utilisation of the goods as such. The broader fiscal meaning of consumption and use supported this construction. The contention that the samples remained physically intact or became unsaleable after expiry did not alter the legal effect of such utilisation.

Conclusion: Drawing and retaining the samples in the factory amounted to deemed removal under Rules 9 and 49, against the assessee.

Final Conclusion: The appeal failed because the samples were neither eligible for exemption nor outside the deeming fiction of removal under the Central Excise Rules.

Ratio Decidendi: Reference samples of excisable goods, when required to be drawn and retained in the factory, constitute utilisation as such and are deemed to have been removed under the Central Excise Rules; exemption conditioned on distinct packing is unavailable where that condition is not satisfied.

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