The Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no excise duty payable on medicament, injection and capsule samples not cleared outside the factory.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) remarked that the appellants have maintained records as far as the control samples are concerned and as far as internal samples are concerned, it can be gleaned from the Standard Operating Procedures adopted by the appellants that the samples are either consumed in the course of testing or destroyed. In the absence of any contrary proof put forth by the Revenue, the claim of the appellants cannot be brushed aside.
The appellant/assessee are engaged in the manufacture of medicaments, injections and capsules. The appellants retain certain samples in pursuant of Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1945 for the purpose of testing. The appellants also retain certain samples for control purposes. On conduct of an audit, the department was of the opinion that the appellants have failed to discharge applicable duty on the samples drawn for internal testing and control purposes. Show Cause Notices were issued periodically and were confirmed/upheld.
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The assessee contended that drawing of samples for in-house testing involves small quantities of unlabeled solutions at the stage of processing. The drawl of samples, as per the statutory provisions contained in Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1945,is duly recorded in RG-1. The appellants record the drawl and destruction of samples in their private record also. Department relied on provisions contained in Para 3.2 of Chapter 11 of the CBEC Manual of Supplementary Instructions. No excise duty payable on the samples drawn for in-house testing. It has been wrongly alleged that the appellants were not maintaining any records for the drawl and destruction of the samples.
The assessee argued that in terms of Section 3, excise duty is leviable on the manufacture of excisable goods. The samples do not conform to be final products ready for clearance. The manufacturing process involving bottling and labelling is not complete at the time of drawl of sample and therefore, the samples cannot be held to be excisable goods. The appellants draw samples for each batch of the drugs; during testing the samples either get consumed or minor remnant, if any, is destroyed. The samples not being cleared outside the factory are not liable to excise duty.
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The department contended that the appellants are not maintaining proper accounts for the samples, they are liable to pay appropriate excise duty.
The tribunal held that no duty is payable on the samples if they are not cleared outside the factory. The tribunal found any reason as to deviate from the stand taken by the Tribunal in other cases. The Department did not show any evidence of clearance of the samples outside the factory. As long as the samples are not cleared outside the factory, no duty is payable.
Case Details
Case Name: M/s Fresenius Kabi Oncology Ltd. v/s The Commissioner of Central Excise Goods & Service Tax, Shimla
Citation: Excise Appeal No. 58106 Of 2013
Decision Date: 27.08.2024
Tribunal: CESTAT Chandigarh
