AI Drafter 
TaxTMI 
TaxTMI 
2018 (12) TMI 1473
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....ch are in fully manufactured condition for testing quality of products in their house laboratory as well as preserving for future complaints, if any, till expiry of the said goods. And thereafter the same are destroyed. 2.3 The appellants did not follow the proper procedure as per Central Excise Rules, 2002 and retained/ destroyed the sample without payment of appropriate Central Excise duty leviable on these samples and thereby short paid the duty to that extent. 2.4 A show cause notice dated 02.02.2007 was issued to them demanding the duty short paid by invoking extended period of limitation as provided for under proviso to Section 11A(1) of the Central Excise Act, 1944. Interest was also demanded under Section 11AB and penalty under Section 11AC also proposed. 2.5 Another show cause notice dated 08.01.2008 was issued to them demanding the duty short paid by invoking provision of Section 11A(1) of the Central Excise Act, 1944. Interest was also demanded under Section 11AB and penalty under Section 11AC also proposed. 2.6 First show cause notice was adjudicated by the Additional Commissioner vide his order in original dated 30.08.2007, holding as follows: "(i) I con....
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....nstructions, duty is not payable on the samples taken for test purpose. They also relied up[on series of case laws in their support a. Omega Pharma [2006 (206) ELT 908 (T)]; b. Exon Laboratories [2006 (205) ELT 952 (T)] c. Traco Cable [2000 (126) ELT 952 (t)]; d. Bhansali Engg {1999 (114) ELT 947 (T)]; e. Gulf Oil Corpn {2007 (213) ELT 380 (T)] f. Akash Indi Ltd {2002 (48) RLT 261 9T)] iv. Samples are drawn for the quality control purpose and were not cleared outside the factory, but either retained as control sample and/ or returned back to the production line and, thereafter cleared on payment of duty. v. Marginal samples consumed in various test process are not liable to duty. Even the control samples retained in the factory are also not liable to duty as has been held by the Larger Bench in case of [2005 (182) ELT 185 (T-LB)} vi. The demand made for the period Jan 2002 to Dec 2006 is barred by limitation as extended period is not invokable in the present case. vii. Mandatory penalty as prescribed by Section 11AC is not imposable in facts and circumstances of this case. 4.1 We have heard Shri M H Patil Learned ....
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....ch samples drawn for quality control purpose. The relevant portions of said decision are reproduced below: "3. Shri A. Lakshmikumaran, learned Advocate for respondent pleaded that the Basic Manual of Departmental Instructions on Excisable Manufactured Product as on 31-12-1979 deals with samples in Para 113 and Para 114. It gives the various categories of samples drawn which are as under :- "Categories of 114 Samples (i) for supply as trade samples to customers for trial; (ii) for test purposes; (iii) for supply against contracts or orders from the Government or for enforcement of control measures; (iv) for display at exhibitions, fairs and in show cases; (v) for market inquiries by Central Excise Officers Procedure for the drawal and accounting of these samples. I. Trade samples --------------------------------------------------------------------- II. Samples for test purposes The samples from this category will generally include - (a) Samples required for laboratory test in the factory and for preservation for investigation of complaints; (b) Samples required for tests at sister concerns and independent testing agencies; (c) Samples for Go....
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....Court as reported in 2002 (143) E.L.T. A175 (iii) Bayer Diagnostic India Ltd. v. C.C.E., Vadodara - 2001 (133) E.L.T. 140 wherein it was held that "As regards the samples drawn and store in fully manufactured and packaged condition under sub-rule (1) of the aforesaid Rules, it has come in the proceedings that these samples were kept for a period well beyond the date of expiry printed thereupon. The goods which have crossed the date of expiry cannot be marketed and applying the drawing test of marketability, the goods cannot be called to be dutiable goods. Therefore the question of short payment or non-payment of duty upon them also does not arise". He also referred to Rules 9 and 49 of the Central Excise Rules, 1944 and pleaded that the explanation to Rule 49 makes it clear that deemed clearance will only be considered when the excisable goods are utilised as such or are used for manufacture of any other commodities in a continuous process or otherwise in the factory. In the present case the samples are only kept for control purposes in the factory and these are not used or cleared in terms of Rules 9 and 49. When these will be cleared, the appellant will be liable to duty....
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....he assessee is liable for penalty under Section 11AC of the Act for not accounting the control sample in the daily stock account register. We do not find any substance in this argument, as in the case of CCE v. Dabur India Limited (CEA No. 2 of 2005) (supra), it was held that no duty is to be charged on the control sample, but the proper account of receipts and utilization of such sample in the laboratory should be maintained. In the instant case, there is no allegation that the proper account was not being maintained, but it is said that the sample is to be accounted in the daily register. In our view, in the daily account register only those items are to be entered, which are withdrawn from the factory. Hence, in this appeal, no substantial question of law is arising from the order of the CESTAT." 5.3 Hon'ble Bombay High Court has in case of RPG Life Sciences Ltd [2011 (264) ELT 346 (BOM)] held as follows: 3. Mr. Jetly, learned counsel for the revenue submitted that the Larger Bench decision in the case of Dabur India Ltd. (supra) has been distinguished in a subsequent decision of the Tribunal in the case of Positive Packaging Industries Ltd. v. Commr. of C. Ex., New Panvel....