2011 (12) TMI 400 - AT - Service Tax

Application for waiver of pre-deposit of duty, interest and penalty - demand in respect of free replacement of the expired pharmaceutical products Held that - Goods are transferred from the factory on stock transfer basis to the depot on payment of duty and the free replacement is from the depot out of the duty paid goods in favour of assessee.

Summary

Issues:
Waiver of pre-deposit of duty for free replacement of expired pharmaceutical products.

Analysis:
The applicants filed an application seeking waiver of pre-deposit of duty amounting to Rs.3,05,724, along with interest and penalty, related to the free replacement of expired pharmaceutical products. The Revenue contended that duty was not being paid on the free replacement items. However, the applicants argued that they manufacture pharmaceutical products without factory gate sales, transferring all goods to the depot on a stock transfer basis with appropriate duty payments. Any discrepancy between depot sales price and duty paid at the factory results in additional duty payment. The free replacements are made from duty-paid goods at the depot. The Tribunal noted that the show-cause notice explicitly stated that free replacements come from the depot, where goods are transferred from the factory with duty paid. Considering this, the Tribunal found merit in the applicants' argument and waived the pre-deposit of dues, staying the recovery during the appeal's pendency. The stay petition was allowed, providing relief to the applicants.

This judgment primarily revolves around the issue of waiver of pre-deposit of duty concerning the free replacement of expired pharmaceutical products. The crux of the matter lies in whether duty payment is required for such replacements. The Revenue alleged non-payment of duty on free replacements, while the applicants contended that duty was paid on all goods transferred to the depot on a stock transfer basis. The Tribunal analyzed the process of manufacturing and transferring goods, emphasizing that the free replacements were made from duty-paid goods at the depot. The Tribunal's decision to waive the pre-deposit and stay recovery during the appeal signifies a favorable outcome for the applicants, acknowledging the merit in their argument regarding duty payment on the replacements.

The Tribunal's decision was influenced by the specific mention in the show-cause notice that free replacements originate from the depot, where goods are transferred from the factory with duty paid. This crucial detail supported the applicants' position that duty had been appropriately paid on the goods in question. By granting the waiver of pre-deposit and staying the recovery process, the Tribunal recognized the validity of the applicants' claim regarding the duty status of the free replacement pharmaceutical products. The allowance of the stay petition further solidifies the Tribunal's acknowledgment of the merit in the applicants' contentions, providing them with relief during the appeal process.