Customs, Excise and Gold Tribunal - Mumbai
Exon Laboratories P. Ltd. And Shri Nitin ... vs Commissioner Of Central Excise on 5 July, 2004
ORDER K.D. Mankar, Member (T)
1. The appeal is directed against the order in appeal passed by the Commissioner (Appeals) whereby the appeal of the appellants against the order in original was rejected. In the order in original the adjudicating authority had confirmed the demand of excise duty of Rs. 35,886/- in respect of shortage in the raw material stock. Besides, central excise duty of Rs. 78,754/- was confirmed in respect of clearances of samples during the period of October 1993 and September 1998. Penalty of Rs. 36,000/- was imposed under Section 11AC and penalty of Rs. 10,000/- was imposed on Shri Nitin Bund under provisions of Rule 209A of the Central Excise Rules, 1944. The instant appeal challenges the order of the lower authorities.
2. Heard both sides.
3. So far as the shortages in respect of inputs is concerned, the appellants pleaded that the duty of Rs. 35,886/- on the alleged shortage was paid on 12.9.1998 itself, on the day of the visit of the central excise officers. The duty payment is not in dispute. The penalty of Rs. 36,000/-being a composite amount for input shortage as well as in respect of samples, the appellants plead that the said penalty be set aside. It is conceded by the appellants that, in respect of shortage of inputs, duty is payable and prompt payment of the said duty before issue of show cause notice does not erase the fact of removal of inputs without payment of duty thereon.
4. Demand for duty on samples taken from each batch of the medicine, to ascertain as to whether or not the medicines have attained the stage of marketability has been contested. The learned counsel pleaded that such samples can not be subjected to duty in terms of the decision of the Tribunal in the case of Collector of Central Excise, Gantur v. Sahuwala Cylinders (P) Ltd. reported in 1998 (98) ELT 645 (Tribunal) and the Tribunal's decision reported in 1989 (39) ELT 689 (Tribunal) in the case of Collector of Central Excise v. General Cement Products (P) Ltd. and that reported in 1999 (1.14) ELT 947 (Tribunal) in the case of Bhansali Engg. Polymers Ltd. v. Commissioner of Central Excise, Indore, All these decisions maintained a consistent position that samples drawn for quality control test to ascertain the marketability of products are not liable to excise duty. The decision of the Supreme Court in the case of I. T, C. Limited v. Collector of Central Excise, Patna reported in 2003 (151) ELT 246 (S.C.) was also placed before me by the learned counsel wherein the Hon'ble Supreme Court had held that, the cigarettes sticks sent within the factory for quality test is not exempted from excise duty. However, he pointed out that in the said case the Hon'ble Supreme Court had given the above ruling, taking into account the fact that the appellants could not produce any documentary evidence to show that the cigarette sticks were destroyed during the quality control test and for that reason cigarette sticks sent to the laboratory for quality control test were held liable to duty. In the instant case, the appellants have maintained full record of the samples taken form the batch of medicines for conducting quality control test and only after the qualification of samples through such test the product could be cleared for marketing. It is the submission of the learned counsel that without such quality control test, the appellants are not allowed to sale the product in the market.
5. On Considering the above submissions, I hold that, the samples cleared for quality control test are not liable to any excise duty. Therefore, penalty imposed and duties demanded are required to be set aside. The only penalty that can be sustained is with reference to removal of input on account of shortage of stock of inputs. The duty amount of Rs. 35,886/- is not in dispute and not the subject matter of the appeal.
6. In the light of the discussion above, I feel that penalty of Rs, 36,000/-imposed has to be reduced.
7. Accordingly, I allow the appeal partly by reducing the penalty of Rs. 36,000/- to Rs. 5,000/-. The duty demand to the extent of Rs. 78,754/- on the clearances of the samples is set aside. In these circumstances, the penalty imposed on Mr. Nitin Bund is also set aside. The appeal is partly allowed, and the impugned order is modified to the extent indicated above.
(Announced in Open Court)