Samples Sent For R&D/Testing Are Not Finished Goods, And Their Movement To Lab Is Not Clandestine Clearance: CESTAT

Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member) stated that the assessee cleared samples for testing purposes to its in-house facility at Surat in the State of Gujarat and had not cleared finished goods. It cannot, therefore, be said that the assessee was engaged in clandestine removal of goods.

In this case, the assessee/appellant was engaged in Contract Research and Manufacturing Services in relation to various fluorochemical products, and for this purpose, it carried out research on behalf of its clients so as to develop new processes as per the specifications of the clients.

According to the assessee, small quantities of the samples were dispatched to its in-house laboratory at Surat in the State of Gujarat for testing purposes, as it did not have the required equipment at its facility at Dewas.

The dispute is with respect to these samples, which, according to the assessee, were sent to its in-house facility at Surat for testing/ research and development purposes.

A show cause notice was issued to the assessee, alleging that the finished products developed by the assessee were cleared without payment of duties because 'similar' products were listed in the finished products.

It was alleged that the assessee was therefore engaged in the clandestine removal of goods. The Commissioner confirmed the demand made in the show cause notice.

The assessee submitted that the impugned order erroneously confirms the allegation of clandestine removal of samples sent for testing by assuming them to be finished products cleared without payment of duty.

The issue before the bench was whether the products cleared as samples by the assessee for testing purposes were finished products cleared without payment of duty and, therefore, were removed in a clandestine removal by the assessee.

The Tribunal looked into covering letters, testing reports and consumption certificates and observed that only testing samples were sent by the assessee to its in-house facility at Surat and not the finished products.

The bench stated that the assessee had produced enough evidence to substantiate that only testing samples had been sent to the in-house facility at Surat, but the department did not produce any evidence to support its view.

It is not possible to accept the finding recorded in the impugned order that the samples that were sent were finished products which had been cleared without payment of excise duty and, therefore, were removed in a clandestine manner, opined the Tribunal.

In view of the above, the Tribunal allowed the appeal.

Case Title: Navin Fluorine International Limited v. Commissioner, CGST and Central Excise

Case Number: EXCISE APPEAL NO. 51623 OF 2022

Counsel for Appellant/ Assessee: Udayan Choksi

Counsel for Respondent/ Department: Ratnesh Kumar Mishra

Click Here To Read/Download The Order