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Dr. Writer’s Food Products Pvt. Ltd. Versus Commissioner of Central Excise, Pune-II And Vice-Versa

2015 (11) TMI 1343 - CESTAT MUMBAI

Clandestine removal of goods (chocolates ) - Destruction of the sample - drawing samples, without payment of Central Excise duty for in-house testing of quality of the goods manufactured and without following any procedure under the Central Excise law, on hourly basis, daily for all the 3 shifts - Penalty u/s 11AC - Held that:- There is no finding of any misstatement and/or contumacious conduct and/or suppression of the records by the appellant-assessee. Further, I find that proper records have .....

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Dated:- 10-4-2015 - SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) For the Petitioner : Shri S.L. Hasija, Supdt. (A.R.) For the Respondent : Shri M.P. Baxi, Advocate ORDER Per: Anil Choudhary: The Revenue and the assessee are both in appeal against the Order-in-Appeal No. P-II/BKS/403/2005 dated 24.11.2005 passed by the Commissioner of Central Excise (Appeals) Pune-II. 2. The brief facts are that the appellant-assessee is engaged in the manufacture of excisable goods viz. chocolates falling under chapt .....

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nd also statement of Assistant Warehousing Manager, wherein it was accepted that they were drawing the samples of the products (chocolates) daily, shift wise, and the samples were for tests namely quality control, infestation, microbial, and for tasting. The samples for quality control and infestation are preserved for the period of one year and 3 months respectively and afterwards disposed off by way of burning. That the assessee had not paid duty on such samples. With reference to para 3.2.2 o .....

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therefore the duty calculation for the period January, 2004 to December, 2004 has been done on MRP based assessment. It was alleged that the samples drawn and cleared to the In-house quality control laboratory by the appellants are covered by the category of samples under para 3.2.1 of Chapter 11 (samples) of the Excise manual of supplementary instructions, and in view of the Supreme Court decision in the case of ITC Limited the procedure given under paragraph 3.2.2 is applicable to the said sa .....

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samples cleared for in-house testing, in a legible manner, indicating the particulars regarding destruction of goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity involved for testing, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid which were deficiently accounted for in RG1/Daily Stock Account Register. (2) Rule 5 of CENVAT Credit Rules, 2002 read with erstwhile Rule 9, 52A and Rul .....

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ut no proper procedure was followed nor records maintained properly. Though they have maintained the registers in the quality assurance department, they did not have the quantitative details of receipts and disposal of the same. It only shows manufacturing line from which they are drawn. It is further alleged that in respect of clearances of samples for testing, there is no specific special exemption from payment of Central Excise duty or from observing the formalities for maintenance of account .....

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ernment Test Centres including the chemical examiner for test. So far as quantification of the duty in dispute is concerned for the samples cleared for in house testing purposes, the goods cleared as sample by the assessee have nor been cleared for sale outside the factory premises and not amounting to sale and therefore the violation of the same is to be seen as per Section 4 of Central Excise Act read with Rule 8 of Central Excise Valuation Rules 1975 and 2000 respectively as applicable and ac .....

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ot penalty be imposed and interest demanded. The appellant contested the show-cause notice. No written reply was filed, but oral hearing was availed. The same was adjudicated vide order dated 1.3.2005. The adjudicating authority held that the assessee has not followed the procedure prescribed under the Central Excise manual of supplementary instructions and/or make invoice under Rule 11 of Central Excise Rules and make entries for the goods (samples) in the daily stock account. Appropriate duty .....

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lusively. As regards penalty and interest it had been contended by the assessee by relying on the ruling in the case of Commissioner of Central Excise, Delhi Vs. Machino Montel India Ltd. 2004 (168) ELT 466 where it is held that no interest and penalty is payable as there is no wilful breach of law and/or contumacious conduct. As extended period was involved, therefore rejecting the submissions of the assessee he imposed penalty of ₹ 3,90,584/- under Section 11AC of the Act along with dema .....

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samples after completion of manufacturing. Therefore the goods are not excisable. It was further urged that infestation samples and control samples were drawn after packing of the manufactured goods so that the samples could be identified for checking genuineness of complaint from the customer/Food and Drugs Adulteration administration. On the packing, batch number, manufacturing date/month and other relevant details were mentioned which was helpful in identification of sample in case of compla .....

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ing clearance of infestation samples to the market. Therefore, not Excise duty is demandable on the goods which were destroyed and not sold in the market. It was further urged that as regards control samples, the shelf life was one year and control samples were preserved for the period of one year. Therefore, the same could not be marketed after completion of shelf life, which is barred by FDA Rules. The samples are destroyed by way of burning, as there is no clearance, no duty is demandable. It .....

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e ruling of the Honble Apex Court in the case of ITC Ltd. Vs. CCE (supra) and had the failed to comprehend that the samples of the appellants are not marketable. The decision in ITC case had no application to the instant case because of the dis-similarity of circumstances of the two cases. That is, in the instant case the record of drawl of sample and destruction was maintained by the appellant's lab. Further it was urged that in Rule 10 of Central Excise Rules, 2002, there is no form presc .....

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rving that the appellant have paid the entire duty amount before the issue of show-cause notice and relying on the ruling in the case of Machino Montell (supra) held that no penalty and interest is chargeable. Accordingly allowing the appeal in part the differential duty was sustained and the demand of interest and penalty was set aside. Being aggrieved with the said order the appellant-assessee preferred appeal before this Tribunal against the confirmation of duty while the Revenue is in appeal .....

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c procedure for drawing of samples and the particular quantities of samples are drawn as control samples and for various investigations. The samples drawn were in finished form and were retained for different periods from the date of drawl and disposed off by way of destruction. As regards the infestation samples these are also drawn from the manufacturing line and after testing these are preserved for a period of three months. After the period these are disposed of by way of destruction. It is .....

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