By TIOL News Service

MUMBAI, JULY 20, 2015: THE appellant-assessee is engaged in the manufacture of chocolates.

During a visit to the factory in October 2003, the CE officers noticed that the assessee was drawing samples for in-house testing of quality of the goods manufactured, on hourly basis, daily for all the 3 shifts and without following any procedure under the Central Excise law &without payment of Central Excise duty.

In their statements the company personnel admitted that they were drawing samples of the products (chocolates) daily, shift wise, for tests, namely quality control, infestation, microbial, and for tasting; that the samples for quality control and infestation are preserved for a period of one year and 3 months respectively and afterwards disposed off by way of burning and that they had not paid duty on such samples.

Suffice to say that a SCN seeking recovery of CE duty of Rs.3.98 lakhs for the period April 2000 to December 2004 came to be issued on 25.04.2005.

Incidentally, the assessee had by this time already paid the CE duty and also an interest amount of Rs.2 lakhs approximately.

The adjudicating authority confirmed the demand and imposed equivalent penalty and interest.

The Commissioner(A) observed that the assessee had paid the entire duty amount before the issue of SCN and relying on the decision in Machino Montell India Ltd. - 2004-TIOL-423-CESTAT-DEL-LB held that no penalty and interest is chargeable.

Being aggrieved with this order dated 24.11.2005, both the assessee and the Revenue are before the Tribunal - assessee against confirmation of duty demand and Revenue against the largesse granted by the Commissioner(A).

Before the CESTAT the appellant inter alia submitted that from a perusal of the SCN it was evident that the demand has been calculated on the basis of record of samples drawn and maintained by the assessee; that only for the absence of a column mentioning the date of destruction of the sample no adverse inference can be drawn without there being any finding as to clearance and/or sale of the samples by the assessee;that the lower authority had failed to properly interpret para 3.3. of Chapter 11 of CBEC's Excise manual of Supplementary Instructions, under which no duty is payable if samples are preserved in the factory for a certain period for investigation of complaints, if any.

The AR submitted that dropping of penalty is bad in law and needs to be restored.

The Bench observed -

“7. …, I find that that (sic) is no finding of any misstatement and/or contumacious conduct and/or suppression of the records by the appellant-assessee. Further, I find that proper records have been maintained of the drawal of samples in the usual course of business. Only for the sake of absence of the record for date of destruction of the sample, without there being any finding as to clearance or sale of any sample products by the assessee, no adverse inference can be drawn based on presumptions and assumptions. In this view of the matter, I set aside the impugned order. The appeal of the appellant-assessee is allowed and the appeal of the Revenue is dismissed. The appellant-assessee will be entitled to consequential benefit(s) in accordance with law.”

In passing: Kuch meetha ho jaaye…

(See 2015-TIOL-1464 -CESTAT-MUM)