ALBERT DAVID LTD. Vs. CCE

JUDGEMENT

(1.) M /s. Albert David Ltd. have filed the present appeal being aggrieved by the Order -in -Appeal No. 213/2001 dated 26.11.2001 in which the Commissioner (Appeals) has confirmed the demand of central excise duty amounting to Rs. 34,363.36 and equivalent amount of penalty. Shir D. Chattangia, learned General Manager of the appellants, submitted that the appellants manufacture generic and PP medicines; that they are under obligation to keep 6 Nos. control samples of each batch till 3 months after its shelf life under the Drugs & Cosmetics Act; that each batch is tested as per protocol and only after finding results within the limits, the medicine is released for marketing; that the RG -I stage arises only if the batch passes all tests and not before; that during the manufacturing process, they take away 21+6 bottles of each batch for quality control test of which 21 bottles are used for various test and if tests pass, then keep remaining 6 bottles for reference sample; that at no point of time, the control samples are taken out from the Quality Control Department; that as these samples are taken before RGI stage, the same are not entered in RG -I; that when samples after expiry period are destroyed, no entry is being made in RGI register but necessary entries are made in RGI register of scrap items and when scrap is sold, duty is paid. Learned Representative, further, submitted that Central Excise Officers visited their factory premises on 26th July, 1999 and seized the control samples; that Additional Commissioner under the Adjudication Order No. 15/99 dated 13.12.1999 held that the control samples should have been accounted for in RG -I register as they are identical in packing of the goods which are sold in the market, confiscated seized goods with an option to redeem the same on payment of fine of Rs. 50,000/ -, confirmed central excise duty amounting to Rs. 2,29,551/ - in respect of the control samples seized and confirmed the duty of Rs. 34,363/ - in respect of samples destroyed during the period from August 1994 to July, 1999 and imposed penalty both u/s. 11AC of the C. Ex. Act and Rule 173Q; that on appeal. Commissioner (Appeals) under the impugned order set aside the confiscation and the duty demanded in respect of seized goods, confirmed duty in respect of control samples which had been destroyed and reduced penalty. He now submitted that the control samples cannot be treated as finished goods because these samples are stamped "control samples not for sale"; that these samples are for reference in future to check quality complaint if received from market; that appreciating the importance of the control samples, the Commissioner (Appeals) had set aside the confiscation and demand of duty on the control samples; that however, he has applied different principles in respect of samples destroyed after their expiry; that the control samples are taken out from the manufacturing area by Quality Control Department for the purpose of testing its suitability and at no point of time these samples are taken from bonded store room after attaining the RGI stage; that there is also no physical removal of these samples for sale from the factory. He relied upon the decision in the case of Bayer Diagnostics India Ltd. v. CCE & C, Vadodara -2001 (133) ELT 140 (T) wherein it has been held that the goods which have crossed the date of expiry cannot be marketed, and applying the test of marketability the goods cannot be called dutiable goods and, therefore, the question of non -payment of duty does not arise. Learned Representative also relied upon the decision in the case of Bhansali Engineering Polymers Ltd. v. CCE, 1999 (114) ELT 947 (T) wherein it has been held that the goods are fully manufactured only after passing quality control test and the duty on the sample drawn is not leviable; that the appeal filed by the CCE has been dismissed as reported in (143) ELT A -175.

(2.) Countering the arguments, Shri R.D. Negi, learned SDR, submitted that duty was demanded under the Show -cause Notice in respect of quantity of P or P Medicines which were removed without payment of duty from the place of manufacture; that the Additional Commissioner, under the Adjudication Order, has demanded duty on the quantity of medicines which had been taken as control samples holding that a control sample of medicine being manufactured by the appellants are excisable goods which should have been accounted for in RG -I register; that under Rules 9 & 49 of the Central Excise Rules, taking of sample for retaining inside the factory in accordance with the Drugs & Cosmetics Act will be deemed clearance inasmuch as the medicines are being utilised as samples and, therefore, duty is leviable. We have considered the submissions of both the sides. The Commissioner (Appeals) has only confirmed a demand of duty in respect of sample of P or P medicines which were removed from the factory during August 1994 to July 1999. The Department has not come up in appeal nor filed any cross -objection against the other findings as given in the Impugned order setting aside the confiscation and the demand of duty. The control samples are of the P or P medicines manufactured by the appellants. These samples are kept by them as required under the provisions of Drugs & Cosmetics Act. However, the samples contained P or P medicines which have been manufactured and the duty is to be discharged before these are cleared. There is no substance in the contention of the appellants that these samples have been removed before quality control test. The samples are retained as control samples only if quality control test carried out by them on other sample is successful. Once the test has been carried out the goods have become liable to central excise duty and the mere fact that the control samples had been removed prior to the test will not make them non -excisable. The provisions of Rules 9 & 49 of the C.E. Rules 1944 are very clear wherein it has been provided that excisable goods manufactured and consumed or utilised as such shall be deemed to have been removed from the place of manufacture before utilisation. It has been held by the Tribunal in the case of Mopra Laboratories Pvt. Ltd. v. CCE - : 2001 (127) ELT 695 :, 2001 (96) ECR 367 (T) that "taking of samples for being retained inside the factory in accordance with the provisions of Drugs & Cosmetics Act will be deemed clearance as per explanation to Rules 9 & 49." We do not fine any substance in the submissions of the appellants that duty has been confirmed on the expired samples as it is evident from the Show -cause Notice that duty has been demanded on the medicines removed for being kept as control samples. The decision in the case of Bayer Diagnostics India Ltd. is, therefore, not applicable. We, therefore, confirm the demand of duty. However, penalty imposed is on the higher side, we reduce the same to Rs. 5,000/ - (rupees five thousand only).