2010 (9) TMI 1125 - HC - Central Excise

Valuation of excisable goods - valuation of the Physicians' Free Samples distributed - duty-demand during the extended period - on behalf of the revenue it was contended that the period involved in the present case is from April 2005 to January 2007 and that at the relevant time the issue stood clarified by the Board Circular dated 25.4.2005 - According to the Tribunal, when different interpretations were possible, the extended period of limitation could not be invoked and penalty could not be levied. HELD THAT - As assessee had entertained a bona-fide belief as regards the manner in which the valuation of the goods in question (Physician Samples) was to be determined. It is true that at the relevant time the Board had issued clarification in that regard in April 2005, but as has been rightly observed by the Tribunal, despite the aforesaid clarification the issue was not finally settled as the Tribunal had itself referred the issue to the Larger Bench. Moreover it is settled legal position that a Circular issued by the Board is binding on the Department but not on the courts or the assessees (State of Kerala v. Kurian Abraham (P) Ltd., 2008 (2) TMI 289 - SUPREME COURT ) Manner in which the valuation of the goods in question was to be determined was merely a difference of perception. The assessee was paying the duty by determining the valuation of the goods in question under a particular rule, whereas according to the department duty was required to be paid by determining the valuation under a different rule. Thus it cannot be said that there was any suppression of facts or intent to evade duty on the part of the assessee so as to call for levy of penalty under section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. Hence, the question of invoking the extended period of limitation did not arise at all. Thus not possible to state that the Tribunal has committed any legal error in holding that in the facts and circumstances of the case, the extended period of limitation could not have been invoked. No substantial question of law.

Summary

Issues:
1. Challenge to the order of the Customs, Excise & Service Tax Appellate Tribunal by the appellant - revenue.
2. Valuation of Physician Samples under Central Excise Act, 1944.
3. Interpretation and application of CBEC Circular No: 813/10/2005-CX.
4. Justification of invoking the extended period of limitation.
5. Levying penalty under Section -11AC of the Central Excise Act, 1944.

Analysis:

Issue 1:
The appellant-revenue challenged the order of the Customs, Excise & Service Tax Appellate Tribunal raising questions on the justification of duty demand during the extended period, contradictory views on valuation, the binding nature of CBEC Circular, compliance with decisions of the Hon'ble Apex Court, and the penalty under Section -11AC.

Issue 2:
The respondent-assessee, engaged in manufacturing "P & P Medicaments," cleared Physician Samples by paying duty on the assessable value determined on a cost basis. The Department contended that the valuation should be determined under Section 4(1)(b) of the Central Excise Act, 1944, read with the Valuation Rules. The Tribunal upheld the duty demand but held that the extended period of limitation could not have been invoked.

Issue 3:
The Tribunal noted conflicting views on the valuation of Physician Samples despite the CBEC Circular No: 813/10/2005-CX. It emphasized that the circular was binding on the Department but not on the courts or the assessees, citing legal precedent. The Tribunal found that different interpretations were possible, justifying non-invocation of the extended period of limitation.

Issue 4:
The Tribunal reasoned that the assessee had a bona fide belief on valuation, and there was no intent to evade duty. The variance in perception on valuation rules between the assessee and the Department did not constitute suppression of facts. Therefore, the Tribunal held that the extended period of limitation was not applicable, and penalty under Section -11AC was unwarranted.

Issue 5:
The Court upheld the Tribunal's decision, stating that no legal error was committed. It found no substantial question of law to warrant interference, leading to the dismissal of the appeal. The Tribunal's ruling on the non-invocation of the extended period of limitation was deemed justified based on the facts and circumstances of the case.

This detailed analysis covers the key issues raised in the legal judgment, addressing the challenges, interpretations, and justifications put forth by the appellant-revenue and the respondent-assessee in the context of the Central Excise Act, 1944, and relevant circulars and legal precedents.