No Excise Duty on Samples cleared for Testing and Quality Control Test: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has recently held that, no excise duty shall be levied on samples cleared for testing and quality control on grounds of Cenvat Input Tax Credit (ITC) from the appellant-assessee, Alkem Laboratories Ltd.

The Appellants, Alkem Laboratories Ltd. are a pharmaceutical company producing pharmaceuticals /drugs. The raw materials and packaging materials are used by the Appellant- manufacturer in the factory in manufacture of ‘sample’ /exhibit batches’. It was submitted by the appellant-assessee that “The process of manufacture of ‘exhibit batches’ is one of the processes which ultimately lead to the manufacture of the final products which is cleared on payment duty.  It is a must/ necessity that it needs testing and hence, the same forms an integral part of manufacture and without which it is not possible to manufacture the final products. Without testing, the medicines (‘approved final products’) cannot be put out in the market.”

It was further contended by the assessee that “Even if it is assumed that the appellant manufactured an item, the same is not marketable in as much as the same has not attained any level of marketability as is clear from the facts that the same was sent outside factory for testing and sampling purpose. He placed reliance on the judgment of Bhansali Engg Polymers Ltd. Vs. Commissioner of Central Excise (2002).

It was also submitted by the assessee that the demand was barred by limitation, as there was no suppression on the part of the appellant in not paying alleged duty on such sample.

Observing that the said products made by the assessee were used for testing and quality control and that the said products were disposed of within the factory thereafter, the bench comprising Ramesh Nair and Raju held that no excise duty shall be levied on samples cleared for testing and quality control.

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