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2015 (8) TMI 149 - AT - Central ExcisePenalty u/s 11AC - valuation of physician samples - Intention to evade duty - willful mis-statement or suppression of facts - Held that - Appellant-assessee was paying excise duty on cost construction method ever since they started clearing physician samples of P&P medicines and there was no provision in ER-I return to provide such information. The appellants have maintained that there is no intention on their part to evade central excise duty inasmuch as physician samples have been cleared on payment of duty. The Adjudicating Authority has himself dropped the penalty under section 11AC and also under Rule 25 for the extended period, as there is no malafide intention or suppression of facts considering the fact that the appellants have already paid the differential duty. The appellants are not liable for penalty under Rule 25. - By following the judgments of the Hon ble High Court of Gujarat (2010 (9) TMI 422 - GUJARAT HIGH COURT) and the Hon ble High Court of Madhya Pradesh (2014 (2) TMI 1192 - MADHYA PRADESH HIGH COURT), the impugned order insofar as it pertains to imposition of penalty of ₹ 7,92,529/- under Rule 25 is set aside - Decided in favour of assessee.
Issues: Penalty imposed under Rule 25 of the Central Excise Rules, 2002
Detailed Analysis: 1. Valuation of Physician Samples and Imposition of Penalty: The appellant, a manufacturer of P&P medicines, was facing a penalty of Rs. 7,92,529 imposed under Rule 25 of the Central Excise Rules, 2002. The Commissioner confirmed the demand for this penalty but also dropped certain demands and penal proceedings. The appellant argued that they had no intention to evade excise duty on physician samples as they were cleared after payment of duty. They contended that the duty was paid based on the cost construction method. The appellant cited the decision of the Hon'ble High Court of Gujarat in a similar case to support their argument. 2. Interpretation of Rule 25 of the Central Excise Rules: The appellant relied on the interpretation of Rule 25 provided by the Tribunal, which stated that penalties under this rule should not exceed the duty on the excisable goods. The Tribunal found that the circumstances did not warrant the imposition of penalty under Rule 25 as there was no contravention of the nature specified in the rule. The Tribunal emphasized that Rule 25 should be read in conjunction with Section 11AC of the Central Excise Act, which deals with penalties for short levy or non-levy of duty due to specific reasons. 3. Precedents and Legal Interpretations: The appellant also referenced a decision of the Hon'ble High Court of Madhya Pradesh to support their argument that there was no fraud, collusion, willful misstatement, or suppression of facts to evade duty, thus questioning the imposition of penalty under Rule 25. The appellant's counsel reiterated that based on the findings of the adjudicating authority and the High Courts' decisions, the penalty should be set aside. 4. Revenue's Argument and Legal Precedents: The Revenue argued that the method of valuation of physician samples was not in dispute, citing a Tribunal decision and a Supreme Court confirmation. They referred to a Board's Circular clarifying the valuation of samples distributed by physicians. The Revenue relied on judgments of the Hon'ble High Court of Bombay and the Tribunal's Larger Bench to support their position. 5. Decision and Rationale: After considering the arguments from both sides and reviewing the records, the judge found that the appellant had consistently paid excise duty on physician samples using the cost construction method. The judge noted that the penalty under Section 11AC and Rule 25 had been dropped for the extended period by the Adjudicating Authority due to the absence of malicious intent or facts suppression, especially considering the payment of differential duty. The judge, following the precedents of the Hon'ble High Courts of Gujarat and Madhya Pradesh, set aside the penalty imposed under Rule 25, allowing the appeal on that specific issue. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, the legal interpretations applied, and the final decision rendered by the judge.
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