TMI Blog2010 (5) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... have been understood and regulated by departmental instructions corrected upto 31-12-1979 and in that sequence same are accelerated by way of supplementary submissions as on 1-9-2001 indicating that the control samples cannot be subject matter of the excise duty - On the mere reading of explanation to Rule 9 and Rule 49, it appears that nothing expressly has been dealt with about the imposition of excise duty on control samples - Decided in favor of the assessee - 3 of 2005 - - - Dated:- 12-5-2010 - R.B. Misra and V.K. Sharma, JJ. REPRESENTED BY : Shri Sandeep Sharma, ASGI, for the Appellant. S/Shri Dev Nath and Rahul Mahajan, Advocates, for the Respondent. [Order per : R.B. Misra, J. (Oral)]. In reference to order dated 9-2-2005 passed by Customs, Excise Service Tax Appellate Tribunal (in short CESTAT ) in appeal No. E/4039, 4043-44/03 NB(C) [2005 (182) E.L.T. 185 (Tri. - LB)] arising out of the order-in-appeal No. 965-967/CE/CHD/2003 dated 6-10-2003, passed by Commissioner (A) Central Excise, Chandigarh, the following question has been referred by the Commissioner Central Excise, Chandigarh, for declaring the same as substantial question of law :- Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntary instructions to the Excise Manual from 1-9-2001 clarified the position that the samples required for laboratory test in the factory and for preservation for investigation of complaints, may be allowed to be drawn provided that the proper account of receipt and utilization in the test in the laboratory is maintained and no duty should be charged on these samples but such samples should be maintained in the account in the prescribed form, however, if at any time the manufacturer desires to clear these samples then these should be assessed to duty as applicable. The control samples as long as these are kept in the factory and not cleared from there shall not be chargeable to duty provided proper account is maintained. When these samples are cleared for test or for destruction at that time assessment should be made for duty, if any, liviable as per law. 3. In the facts and circumstances, for success of present appeal preferred under Section 35-G of the Central Excise Rules, 1944, we have to see as whether the above question referred is really a substantial question of law or not. In order to deal with the above question, it is necessary to refer the relevant provisions of Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and [such goods] shall be liable to confiscation.] [Explanation].- For the purposes of this rule, excisable goods produced, cured or manufactured in any place and consumed or utilized- (i) as such or after subjection to any process or processes; or (ii) for the manufacture of any other commodity; Whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the [Commissioner] under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation.] Rule 49. Duty chargeable only on removal of the goods from the factory premises or from an approved place of storage. - [(1) Payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under rule 9 or are about to be removed from a store-room or other place of storage approved by the [Commissioner] under rule 47 : Provided that the manufacturer shall on demand pay the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption or utilization.] 4. Mr. Sandeep Sharma, Learned Assistant Solicitor General of India submitted for and on behalf of the appellant that in view of Rule 9 and the explanation of Rule 9 and 49, if goods manufactured and consumed or utilized as such or for the manufacture of any other commodity in the place of manufacture, goods shall be deemed to have been removed from place of manufacture. The PARTY has to draw reference samples and retain them for a specified period under the Drugs and Cosmetics Rules. Such drawing of samples and retaining the same for a specified period is nothing else but utilization of manufactured excisable goods, as such, in the place of manufacture itself and in view of Explanation to Rule 9 and 49 shall be deemed to have been removed from place of manufacture. 5. In order to strengthen his submission, Mr. Sandeep Sharma has submitted as follows :- (A) The legislature used two expressions consumed or utilized . There can be utilization of goods without destroying its identity. Mr. Sharma has placed reliance on the observations of Supreme Court in Union of India v. V.M. Salgaoncar Bros. [P] Ltd., 1998 (99) E.L.T. 3 (S.C.) the word consump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re fact that the control samples had been removed prior to the test will not make them non-excisable., In Mapra Laboratories (supra) it has been observed that taking of sample for retaining inside the factory in accordance with Drugs and Cosmetics Act deemed as clearance, hence excise duty payable by the appellant under the Rule 9 and 49 of Central Excise Rules, 1944. In M/s. Aristo Pharmaceuticals (supra) it has been observed that drawing the samples and retaining for the same for specified period is nothing but utilization of manufactured excisable goods, as such, in the place of manufacture the samples shall be deemed to have been removed from the place of manufacture. In ITC Ltd. (supra) it has been observed that the samples drawn after fully manufactured products are liable to the excise duty and where the samples were drawn once the medicines were fully manufactured, the duty is leviable on control samples. 6. According to Mr. Sandeep Sharma, learned ASG, the concept of deemed removal has not been considered by the Larger Bench in its order dated 8-2-2005, whereas, the submissions of PARTY i.e. M/s. Dabur India Ltd., have been given weightage. Learned CESTAT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturer preserve the samples of their product for some period for investigation complaints, if received, no duty should be charged on these samples considering that goods remain within the factory. Duty shall be charged, unless exempted by a notification, once the samples are cleared from the factory. If at any time the manufacturer desires to destroy these samples, procedure specified in Rule 21 of the said rules shall be followed. 8. The CESTAT in its order dated 8-2-2005 has observed that the Basic Excise Manual issued by CBEC s and the supplementary instructions to the Excise Manual from 1-9-2001 clarifies that the samples required for laboratory test in the factory and for preservation for investigation of complaints may be allowed to be drawn provided that the proper account of receipt and utilization in the test in the laboratory is maintained. Manufacturer can preserves the samples of their product for some period for investigation of complaints, if any. No duty should be charged on these samples but an account of such samples should be maintained in the prescribed form. If at any time the manufacturer desires to clear these samples then there should be assessed to dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be charged on these samples also, but an account of such samples should be maintained in the form prescribed in Appendix XIX. If at any time the manufacturer desires to destroy these samples, he may present a nil duty ARI for the quantity to be destroyed quoting the relevant code numbers or any other distinguishing marks namely, batch No., etc. in the clearance application and on obtaining the permission from the Superintendent for such destruction, the Sector Officer will supervise their destruction. 11. In sequel to the departmental instructions subsequent instructions were issued on 1-9-2001 and in Chapter 11 dealing with the samples, Clause 3.2 deals with samples for test purposes. For convenience it is extracted as below :- 3.2 Samples for test purposes : 3.2.1 The samples of this category will generally include :- (i) Samples drawn by in-house laboratory for testing quality and adherence to product specifications; (ii) Samples drawn for preservation for investigation of complaints; (iii) Samples drawn for test at other concerns and independent testing agencies; (iv) Samples required to be sent to Government Test Centers including the Chemical Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g it to be deemed removal under Rule 9 Rule 49 of the erstwhile Central Excise Rules, 1944. While approving the decision of learned Tribunal in Commissioner v. Dabur India Ltd., 2005 (182) E.L.T. 185, High Court (D.B.) (of P H) has observed that control samples retained in factory for laboratory tests are not chargeable to excise duty. The High Court (D.B.) (P H) has further held that above question is not a substantial question of law. The relevant paragraphs of Malcom Pharmaceuticals (supra) are as below :- 5. Against the said order, the assessee filed an appeal before the CESTAT. who vide his order dated 11-2-2005 allowed the same and set aside the order of the Additional Commissioner (AE), Central Excise, while following its decision in CCE, Chandigarh v. Dabur India Limited, wherein it was held that the control samples retained in the factory premises for the purpose of laboratory tests are not required to be charged to duty. 6. On January 28, 2008, counsel for the appellant was directed to place on record copy of the order passed by the Tribunal in case of CCE v. Dabur India Limited. The same has been placed on record. The Tribunal in that case, while following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct meaning of Rule 9 and Rule 49 and, as such, are allowed to prevail. The explanations which are appended in Rule 9 and Rule 49 cannot be diluted to give different meaning to the provisions other than the departmental circulars. The explanation utmost could be to facilitate the understanding of the provisions of Rule 9 and Rule 49 regarding point of levy of excise duty. On the mere reading of explanation to Rule 9 and Rule 49, it appears that nothing expressly has been dealt with about the imposition of excise duty on control samples. 15. In our respectful consideration the goods kept for control samples cannot be said to be consumed or utilized as has been indicated by the Lager Bench of CESTAT provided the control samples have been kept in the prescribed form. 16. The High Court of P H (D.B.) has considered the verdict of CESTAT passed on 16-12-2005 in Commissioner v. Dabur India Limited, 2005 (182) E.L.T. 185 and has approved the said verdict of CESTAT and while considering the similar question of law as mentioned above, which is also similarly for consideration before us in the present CEA No. 3 of 2005, has taken a view that the above question of law is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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