Excise Duty Not Payable On Test Production: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that excise duty is not payable on test production.

The bench of Anil Choudhary (Judicial Member) has observed that the appellant/assessee has done only test production prior to November 11, 2010, and they have been doing mainly trading of finished goods as the factory was not fully set up at the testing stage.

The appellant/assessee is in the business of trading and manufacturing aluminum circles falling under Chapter 76 of the First Schedule to the Central Excise Tariff Act, 1985, and is registered with the Department. During a search at the factory premises of the appellant, the department found finished goods and raw materials without any documentary evidence. Thus, the goods, valued at Rs. 8,27,980, were seized. Based on the investigation, two show-cause notices were issued, proposing a duty demand along with interest and penalties on the firm and its partners.

The assessee contended that the record shows that the appellant did some test production prior to 11.11.2010 and began commercial production on 11.11.2010; they have paid duty. Thus, the demand for duty has been erroneously confirmed. The appellant has produced sufficient evidence by filing an income tax return and a sales tax record supporting their turnover. Thus, the confirmation of duty of Rs. 32,23,761 was bad, along with the penalty.

According to the CESTAT, the number of finished goods subject to duty from July 1, 2010, to October 31, 2010, will be NIL. As the duty demand from July 2010 to October 2010 has been set aside, the penalty under Section 11AC, read with Rule 25, is also set aside.

Case Title: M/s Tribhuvan Metal Industries Versus Commissioner of Central Excise

Citation: Excise Appeal No.54217 of 2014-SM

Date: 10.01.2023

Counsel For Appellant: Advocate Jitin Singhal

Counsel For Respondent: Authorised Representative Mahesh Bhardwaj

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