Customs, Excise and Gold Tribunal - Mumbai
Pepsico (I) Holding Ltd. vs Commissioner Of Central Excise on 29 November, 2007
Equivalent citations: 2008(125)ECC171, 2008(151)ECR171(TRI.-MUMBAI), 2008(224)ELT253(TRI-MUMBAI)
ORDER K.K. Agarwal, Member (T)
1. These are four appeals involving a common issue and accordingly, a common order is being passed.
2. The brief facts of the case is that the appellant Pepsico India Holdings are engaged in the manufacture of aerated water. During the process of manufacture of aerated water the appellant draws sample from online for testing which are tested within the factory itself. They also draw reference samples which are retained up to period of 6 months front the date of manufacturing and thereafter they are destroyed since they cannot be marketed. The appellants were issued four show cause notices stating that they have cleared the samples for test purposes in their in house laboratory for testing of quality and for adherence to product specification without complying with the procedures laid down under the Central Excise Rules, 2002 and without payment of Central excise duty leviable thereon. The show cause notice further stated that the appellant draws one bottle of sample every hour for its in house testing for each and every size of the product manufactured by them. The sample is drawn after all process of manufacture is complete i.e. filling, sealing with bottle closure and after process of labeling, printing of MRP, date and time of manufacture and batch number, on the bottles is completed. The samples drawn by them are in fully finished condition on which they have not discharged duty. The samples drawn are tested by the assessee and are stored in its shelf life or drained after the testing is over and as such never brought back into the production. The sample drawn contains all the parameters/requirement, that are in the product actually sold and it is drawn after all manufacturing processes i.e. filling, sealing with bottle closure and after the process of labeling, printing of MRP, date and time of manufacture and batch number, on the bottles is completed. The only process that remains is of putting the bottles in plastic crates/cartons and despatch. The samples are dutiable product and there is no exemption for samples and therefore the appellants were required to discharge duty on the same and to account for its production in the statutory documents like ER1 etc.
3. In two of the show cause notices relating to Appeal No. 3186 & 3187, there is no reference to the samples being tested for shelf life and it only refers to testing which after testing is over is drained out. The show cause notices were confirmed and upheld by Commissioner (Appeals) wherein duties of various amount were demanded and penalties were imposed.
4. Learned advocate for the appellant submit that duty has been demanded only because the samples were not entered in the statutory registers and samples were considered to be fully finished goods which have to be accounted for in the statutory records and can be removed only on payment of duty. It was submitted that it is admitted in all the show cause notices that the samples after testing were drained out or retained for shelf life and were accordingly destroyed. There is neither allegation nor any claim in the show cause notice that the samples sent for testing and for shelf life (in two show cause notices) were not ultimately destroyed. Duty is being demanded only on the ground that they were not entered in the statutory register and since they were fully finished product they could have been removed only on payment of duty. It was submitted that all these samples drawn for testing were accounted for in private records which was submitted for perusal before us. It was from these private records only that the quantum of sample drawn was determined by the department on which duty is being demanded. Once it is an admitted fact that all the samples after testing were duly destroyed, duty could not have been demanded on the same as has been held by the Apex court in the case of ITC Ltd. v. CCE . It was pleaded that in the ITC case cited supra duty on sample was demanded on account of the fact that the assessee could not produce any evidence to show that the samples so drawn were actually destroyed in spite of several opportunities been offered to them. It was not solely on the ground that samples were not entered in the statutory records as is being made out by the revenue. In their case the records were duly maintained though admittedly they were not entered in the statutory records but it is not the revenue's case that the samples after testing were never destroyed. In such eventuality duty cannot be demanded.
5. The learned Jt. CDR Mr. Govil however submitted that the appellants were statutorily bound to enter the production of samples in the statutory records as the goods were in fully manufactured condition and were required to maintain a separate register in respect of samples sent for testing and since there is no exemption in respect of samples drawn for testing purposes, duty has to be discharged on the same. In case the samples are destroyed in testing they have to apply for remission of duty which can be granted by the Commissioner which was not done in the present case and duty has been rightly demanded.
6. We have considered the submissions. We find that it is an undisputed fact that the samples after testing both in the laboratory and for shelf life were destroyed by draining or were rendered unfit for use. It is also a fact that these samples were duly accounted for in the private register of the appellant and in fact the revenue has quantified the duty on the basis of the quantity shown in these private records. Therefore, the quantity of the samples and the fact of destruction is undisputed. Therefore, though we agree that once the samples were in fully finished condition they should have been entered in the RG1 register and a proper statutory account should have been maintained for sending them for testing and in case of destruction or goods being unfit for use, remission of duty should have been sought in the absence of any exemption notification in respect of samples drawn for testing. However, looking into the facts that the samples were admittedly destroyed/unfit for use and would have therefore been eligible for the remission of duty, we hold that duty cannot be demanded as has also been conceded by the revenue in the ITC case where in para 18 it has been clearly stated that revenue could not dispute the proposition that the quantity of the cigarette sticks that is destroyed in the quality control test is not liable to any duty. In the ITC case the duty was demanded in respect of destroyed samples also because of the inability of the assessee to arrive at the particular quantity of the samples which was actually destroyed which is not so in the present case.
We accordingly set aside the impugned orders of the Commissioner (Appeals) and allow the appeals.