2008 (8) TMI 706 - AT - Central Excise

Summary

Issues:
- Appeal against imposition of interest and penalty on physician samples cleared on pro-rata basis under Chapter Sub Heading 3003.10 of Central Excise Tariff Act, 1985.
- Interpretation of judgment by Hon'ble High Court of Karnataka in CE Appeal No. 37/2006 dated 11-4-2007.
- Consideration of interest and penalty in light of the High Court's decision.
- Refund of penalty amount deposited by the assessee.
- Appropriation of interest paid by the assessee.

Analysis:
The appeal stemmed from the clearance of physician samples by the assessee under Chapter Sub Heading 3003.10 of the Central Excise Tariff Act, 1985, on a pro-rata basis. The correct value of the samples cleared was determined as 115% of the cost of production in accordance with Rule 8 of Valuation Rules. The assessee had paid duty before the issuance of a show cause notice and did not contest the duty payment. However, the appeal before the Tribunal focused on the imposition of interest and penalty. The Tribunal allowed the appeal, setting aside the order imposing interest and penalty by Final Order No. 1400/2005 dated 12-8-2005.

The revenue, aggrieved by the Tribunal's decision, appealed to the Hon'ble High Court of Karnataka. In CE Appeal No. 37/2006 dated 11-4-2007, the High Court partially allowed the revenue's appeal, leading to the matter being brought before the Appellate Tribunal CESTAT, Bangalore. The Tribunal, in its judgment, acknowledged that the facts and legal issues were similar to another case, CEA No. 43/2006, which had been partly accepted in a previous order dated 4-4-2007.

The Tribunal, therefore, partly accepted the present appeal in line with the decision in CEA No. 43/2006. It was ruled that the question of penalty was answered against the revenue, and the matter was remitted back to the Tribunal solely for the consideration of interest for the delayed period. The parties were directed to appear before the Tribunal, which was instructed to conclude the proceedings within six months from the date of receipt of the order.

Regarding the payment of interest and penalty, the counsel for the assessee informed the Tribunal that interest had already been deposited as per the High Court's directive, negating the need for penalty imposition. The Tribunal concurred, noting that the High Court had ruled against the revenue on the penalty issue. Consequently, the appeal was allowed in favor of the assessee, with the penalty amount of Rs. 5,000 required to be refunded, and the interest paid by the assessee was to be appropriated. The appeal was disposed of accordingly.