TaxTMI 
TaxTMI 
2016 (7) TMI 78
X X X X Extracts X X X X
X X X X Extracts X X X X
....27th February, 2004 and 7/NGP-I/2004/Dem dated 27th February, 2004 confirming demand of Rs. 1,47,538/- Rs. 65,515/- and Rs. 3,17,341/- respectively being the duty liability not discharged on samples drawn for testing within the factory premises. 3. The assessee is engaged in the manufacture of wires and cables falling under 8544.90 of the schedule to the Central Excise Act, 1985 and, being supplies to electricity transmission and distribution companies, were required to confirm to specifications relating to voltage. The original authority has placed reliance on the circular of Central Board of Excise and Customs No. 1/87-Cx.6 issued under F. No. 224/7/86-CX.6 dated 15th January 1987 and further circular no. 1/91-CX.3 dated 04/01/1991 relat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms dated 15th January 1987, cited supra, and the decision of the Hon'ble Supreme Court in the case of Ranadey Micronutrients v. Commissioner of Central Excise [1997 (87) ELT 19] as well as that in ITC Ltd. v. Commissioner of Central Excise, [2003 (151) ELT 246 (SC)] upholding duty liability on samples taken for testing, it was submitted that the order of the first appellate authority should be reversed. 5. We have heard both sides and perused the records. We find from the Supplementary Instructions of the Central Board of Excise & Customs that a detailed procedure for drawal of samples has been prescribed. The said procedure categorises samples as (i) Trade samples sent to customers for trial; (ii) Samples for test purposes; (iii) Sampl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been segregated and described; apparently, they are not all to be subject to uniform treatment. 8. Manufacturing process requires adherence to quality standards which renders drawing of samples and testing to be an essential ingredient in the process. Undoubtedly, samples could be tested within the factory and elsewhere. It would appear that, in the absence of any exemption for samples taken outside the factory premises, they are be accorded a treatment no different from that of goods removed from the factory of production. 9. However, samples that are retained in the factory of production for prescribed periods as well as those that are subject to test within the factory are not, in effect, removed from the factory and it would appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t cannot be said that the appellant had cleared the control samples for purposes other than those stipulated. There is also no evidence led by the Revenue to show that the appellant did not put to use the control samples by clearing them to customers. The only charge against the appellant is that they did not keep an account of the control samples drawn and tested. This Tribunal in the case of Dr. Reddy's Laboratories Ltd. (cited supra) held that samples mandatorily drawn for testing and getting used up/destroyed during testing cannot be considered as excisable goods liable to duty. Similarly, in the case of J.K. Industries Ltd. (cited supra) it was held that samples of tyres drawn for in-house testing and destroyed during testing is not li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tain the books/accounts as required under the Rules relating to the samples drawn for testing. Where the goods are not cleared out of the factory premises but were drawn for testing within the factory and in fact were consumed within the factory during the process of testing, the question of demanding any duty on those samples does not arise. We draw support for this view from the decision of the Apex Court in the case of ITC Ltd. v. Collector of Central Excise, Patna reported in 2003 (151) E.L.T. 246 (S.C.), particularly para 11 thereof. 5. Decision of the Tribunal in the case of Positive Packaging Industries Ltd. (supra) relied upon by the counsel for the revenue is distinguishable on facts. In that case the samples were cleared out of t....