2016 (1) TMI 198 - AT - Central Excise

Valuation - appellant had discharged the Central Excise duty on the physician samples cleared by them on the assessable value arrived at by the provisions of Section 4 of Central Excise Act, 1944 - Held that - Issue is now settled against the appellants and the appellant has to discharge the duty liability on the physician samples by taking a value proportionate to the MRP of the sale pack of the medicaments. We are of the considered view that the contention raised by the learned representative of the appellant regarding no interest liability arises is not correct and the appellant has to discharge the interest liability on the amount of duty which is confirmed by the lower authorities and upheld by to that extent, the appeal filed by the appellant is rejected. Appellants cleared the physician samples on payment of duty by ascertaining the assessable value under Section 4 of the Central Excise Act, 1944 and they filed monthly returns with the lower authorities for the relevant period in question. We find that the invocation of Rule 25 of the Central Excise Rule is incorrect as the said Rule mandate penalty can be imposed only if there is a violation of the provisions of Rule which is not the case in here as the discharge of duty on the physician samples on an assessable value proportionate to MRP of the park was in dispute and decided by the Hon ble High Court of Bombay in the case of Indian Drug Manufactures Association on 28/09/2006. If that be so, the appellants may have entertained a bonafide belief that the assessable value for discharging duty liability on the physician samples was correctly arrived at by them as per Section 4 of the Central Excise Act, 1944. Confirmation of demand with interest is upheld and penalty imposed on the appellant is set aside - Decided partly in favor of assessee.

Summary

Issues involved: Confirmation of differential duty, interest, and penalty under Rule 25 of the Central Excise Rules, 2002.

Confirmation of Differential Duty: The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise regarding the confirmation of a differential duty of Rs. 56,69,698. The issue arose from the appellant discharging Central Excise duty on physician samples based on Section 4 of the Central Excise Act, while the Revenue argued that Section 4A should apply for products falling under Chapter 30. The Tribunal found in favor of the Revenue, requiring the appellant to calculate the assessable value proportionate to the MRP of the sale pack of the medicaments.

Interest Liability: The appellant disputed the interest and penalty but had already discharged the duty liability. The Tribunal held that interest liability must be paid on the confirmed duty amount, rejecting the appellant's contention that no interest was due. The Tribunal upheld the lower authorities' decision on the interest liability.

Penalty under Rule 25: The Tribunal analyzed the penalty imposed under Rule 25 of the Central Excise Rules, 2002. It noted that the rule may not apply as the appellant had cleared physician samples by paying duty based on Section 4 and had filed monthly returns. The Tribunal found that the penalty was unwarranted as the appellant had a bonafide belief in correctly assessing the duty liability as per Section 4. Therefore, the penalty was set aside.

Conclusion: The Tribunal upheld the confirmation of demand with interest but set aside the penalty imposed on the appellant. The appeal was disposed of accordingly.