Factory-retained medicine samples were held ineligible for excise exemption and treated as deemed removed goods.

P or P medicine samples retained in the factory for quality control were not eligible for exemption under Notification No. 171/70-C.E. because the notification required both a "Not for Sale" marking and packing distinctly different from regular trade packs, and that mandatory packing condition was not met. Retention of the samples in the factory for use as samples was treated as utilisation of excisable goods, attracting the explanation to Rules 9 and 49 of the Central Excise Rules and amounting to deemed removal from the place of manufacture. Duty liability therefore arose despite the claim that the samples were prepared under the Drugs and Cosmetics regime.

---

---

Issues: Whether the samples of P or P medicines manufactured and retained in the factory for quality control purposes were entitled to exemption under Notification No. 171/70-C.E. dated 21-11-1970, and whether such retention amounted to deemed clearance under Rules 9 and 49 of the Central Excise Rules.

Analysis: The exemption notification required not only that the samples be marked "Not for Sale" but also that they be packed in a form distinctly different from regular trade packs. The samples in question were not packed in distinct packing, and the manufacturer had not satisfied the mandatory conditions of the notification. The retention of the samples in the factory for use as samples was treated as utilisation of excisable goods as such, which attracted the explanation to Rules 9 and 49 and was therefore deemed removal from the place of manufacture. On that basis, duty liability arose notwithstanding the plea that the samples were prepared under the Drugs and Cosmetics regime.

Conclusion: The exemption was not available and the samples were liable to central excise duty; the appeal was rejected.

---