2014 (10) TMI 339 - AT - Central Excise

Clandestine removal of goods - Clearance of sample fragrances without payment of duty - Held that - Goods were cleared under covering letter mentioning the name of the item, its price, suggested application and dosage, if any, and the reference for submitting those samples. If the goods were not marketable, the question of mentioning a name, its price, application and dosage would not have arisen at all. Therefore, we do not find any merit in the contention that the goods are not marketable. As regards the reliance place on Bayer Diagnostics India Ltd. case 2001 (3) TMI 168 - CEGAT, MUMBAI , the facts of the said case were completely different and distinguishable. In that case, the goods under clearance were diagnostic regent kits and diagnostic reagent strips falling under the purview of Drugs and Cosmetics Act, 1940. Drugs samples were cleared without any packages and therefore, it was held that since there was a statutory requirement of packaging, which has not been complied with, it cannot not be held that the goods are marketable. In the case before us there is no mandatory or statutory requirement of packaging of the goods and therefore, the ratio of the said decision cannot apply. We uphold the confirmation of duty demand and consequently, the appellant also would be liable to pay interest on the duty demand confirmed. As regards the penalty imposed on the appellant, Section 11A (2B) provides for non-issue of a show-cause notice in case the duty demand is paid before the issue of show-cause notice. In the present case the appellant has fulfilled this condition and therefore, the question of imposition of penalty under Section 11AC would not arise at all. Accordingly, we set aside the penalty imposed on the appellant - Decided partly in favour of assessee.

Summary

Issues:
- Appeal against duty demand, interest, and penalty upheld by the Commissioner of Central Excise (Appeals), Mumbai.
- Allegation of manufacturing and clearing fragrances as samples without duty payment and proper records.
- Argument regarding marketability of goods and compliance with excise duty liability before notice issuance.
- Consideration of submissions from both parties and examination of relevant evidence.

Analysis:

The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai, upholding the duty demand, interest, and penalty imposed on the appellant. The case revolved around the appellant's alleged manufacturing and clearance of fragrances as samples without paying duty and maintaining proper records from 1997-98 to 2001-02. Additionally, soap noodles containing these fragrances were purportedly cleared as samples to potential customers.

The appellant contended that the goods cleared were solely samples for testing market potential and not marketable goods, thus challenging the sustainability of the demands. Reference was made to a Tribunal decision supporting this argument. Alternatively, the appellant claimed to have discharged the excise duty liability before the show-cause notice, negating the need for penalties under Section 11AC of the Central Excise Act.

On the other hand, the Revenue argued that due to the lack of records and communication about goods clearance, the impugned order was justifiable. The Tribunal carefully evaluated both parties' submissions and examined the statement of the Vice President (Marketing) of the appellant company. The statement revealed details of goods clearance, indicating marketable characteristics despite the appellant's assertions to the contrary.

The Tribunal found no merit in the appellant's argument regarding the marketability of the goods, distinguishing the case from a precedent involving diagnostic reagents. It was established that the goods in question did not have a statutory packaging requirement, unlike the goods in the precedent, thus affirming the marketability. Consequently, the duty demand was upheld, and the appellant was liable for interest on the confirmed duty demand.

Regarding penalties, Section 11A (2B) stipulates non-issuance of a show-cause notice if duty demand is paid beforehand. As the appellant met this condition, the imposition of penalties under Section 11AC was deemed unnecessary, leading to the setting aside of the penalty. With this modification, the impugned order was upheld partially, resulting in the partial allowance of the appeal.