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2015 (11) TMI 1343 - CESTAT MUMBAI

2015 (11) TMI 1343 - CESTAT MUMBAI - 2016 (332) E.L.T. 176 (Tri. - 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 .....

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ee. - APPEAL NO. E/149 & 973/06 - Final Order Nos. A/1661-1662/2015-WZB/SMB - 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 enga .....

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he statement of the Supervisor of Quality Assurance Department was recorded and 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 t .....

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unable to adopt the practice based on the cost certificate, CAS 4 guidelines 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 L .....

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in as much as they have failed to maintain proper accounts in respect of the 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 .....

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that the assessee is clearing the finished goods for quality control tests but 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 Cen .....

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and independent testing agencies; (4) for samples required to be sent to Government 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 C .....

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Loss Account be not adjusted against the amounts confirmed and further why not 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 .....

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ly it was held that the charges levelled against the assessee are proved conclusively. 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 impose .....

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uring the course of quality testing. It cannot be equated with consumption of 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 w .....

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f samples to the market and no evidence has been adduced by department regarding 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 des .....

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was further urged that the adjudicating authority had erred in relying on the 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 wa .....

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te of issue of show-cause notice. 4. The learned Commissioner (Appeals), observing 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 .....

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various parameters like infestation, quality control, etc. There is a specific 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 .....

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