2016 (1) TMI 1188 - HC - Central Excise

Valuation - physician samples - contravention of provisions of section 4 of the Central Excise Act r/w rule 4 of the Central Excise Valuation (Determination of Excisable Goods) Rules, 2000 - Held that - It is noticed that duty demand of ₹ 9,17,616/- has already been paid by the assessee almost 10 months before issuance of show cause notice. Since the duty demand together with interest was paid before issuance of show cause notice and, since it was observed by both the authorities below that there was no intention on the part of the assessee to evade duty, the decision rendered by the Commissioner (Appeal) as well as CESTAT directing waiver of penalty under section 11AC of the Central Excise Act, 1944, does not appear to be erroneous. It has been observed that imposition of penalty under section 11AC of the Act is warranted only when there is fraud, collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules made thereunder with an intention to evade payment of duty. Since these circumstances do not exist in the instant matter, imposition of penalty worked out under section 11AC of the Act was not justified and has been rightly waived. Apart from that, as per the instructions issued by the Central Board of Excise and Customs on 17.12.2015, in respect of providing mandatory limit for filing appeal by the department before CESTAT, High Court or the Supreme Court, the threshold limit prescribed in that behalf should have been applied and the instant appeal ought not to have been presented by the revenue. Even otherwise, on consideration of merits of contentions also, no interference is called for in the appeal - appeal dismissed - decided against Revenue.

Summary

Issues:
- Challenge to the decision of the Custom Excise and Service Tax Appellate Tribunal
- Valuation of physician samples for free distribution
- Allegations of undervaluation and contravention of Central Excise Act
- Duty demand, interest, and penalty imposition
- Waiver of penalty under section 11AC of the Central Excise Act
- Compliance with instructions for filing appeal by the revenue

Analysis:
The appeal before the High Court challenged the decision of the Custom Excise and Service Tax Appellate Tribunal, which upheld the judgment of the Commissioner (Appeals) regarding the valuation and duty payment on physician samples meant for free distribution. The respondent, engaged in manufacturing medicaments, was availing cenvat credit but faced allegations of undervaluation and contravention of the Central Excise Act due to not following the Board Circular on sample valuation. The revenue contended that the respondent had not paid proper duty on physician samples between a specific period, leading to a differential duty demand, interest, and penalty under section 11A. However, the Commissioner (Appeals) confirmed the duty demand but waived the penalty imposed on the respondent.

Upon reviewing the judgments of all authorities, the High Court noted that the duty demand had already been paid by the respondent before the show cause notice was issued, indicating no intention to evade duty. The Court observed that penalty under section 11AC is warranted only in cases involving fraud, collusion, wilful misstatement, or suppression of facts to evade duty, which were not present in this matter. Therefore, the waiver of penalty by the Commissioner (Appeals) and CESTAT was deemed appropriate. Additionally, the Court referred to the instructions from the Central Board of Excise and Customs regarding the mandatory limit for filing appeals by the revenue, suggesting that the appeal should not have been pursued. Ultimately, the High Court found no merit in the revenue's contentions, leading to the dismissal of the appeal as it lacked substance and did not warrant interference based on the merits presented.

In conclusion, the High Court upheld the decisions of the lower authorities, emphasizing the absence of fraudulent intent in the respondent's actions and the waiver of penalty under section 11AC. The Court also highlighted the importance of compliance with prescribed limits for filing appeals, ultimately dismissing the revenue's appeal for lack of substance and merit.