2017 (2) TMI 255 - AT - Central Excise

Levy of penalty - whether the penalty under Section 11AC should be imposed in the fact that the dispute relates to valuation of physician samples and the duty and interest have been admittedly paid by the appellants? - Held that - as regards valuation of physician samples the issue was in dispute and various litigations were going on. Therefore the valuations of physician samples were not free from doubt as it involved the grave interpretation of the valuation law. The appellants were clearing their goods under the cover of invoice and discharged the duty therefore there was no suppression of fact in order to invoke the penal provisions. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether penalty under Section 11AC should be imposed for the dispute related to the valuation of physician samples despite duty and interest being paid by the appellants.

Analysis:
The common issue in all appeals before the Appellate Tribunal CESTAT MUMBAI was whether the penalty under Section 11AC should be imposed concerning the valuation of physician samples, even though the duty and interest had been paid by the appellants. The appellants, engaged in manufacturing medicaments, valued their physician samples at 110% of the cost of production and paid the duty accordingly. However, the department contended that the valuation should have been done in accordance with Rule 4 of the Central Excise Valuation Rules, 2000, resulting in a short payment of duty. The duty demand was confirmed by the adjudicating authority, but the appellants did not contest the duty liability and had paid the entire duty along with interest. Their plea was solely for the waiver of penalties imposed under Section 11AC of the Central Excise Act, 1944.

The advocates representing the appellants argued that since the duty and interest were paid without any intent to evade payment, there was no suppression of facts warranting the penalty under Section 11AC. They cited a previous case where the penalty was waived by the Tribunal, along with judgments such as Marsha Pharma Pvt. Ltd., Dr. Reddy's Laboratories Ltd., Alicon Pharma Pvt. Ltd., and Ronald Pharmaceuticals Pvt. Ltd. On the other hand, the Revenue reiterated the findings of the impugned order.

Upon careful consideration of the submissions, the Tribunal observed that the valuation of physician samples was a disputed issue involving various litigations, indicating a lack of clarity in the interpretation of valuation laws. Since the appellants were transparent in clearing their goods and discharging the duty, there was no suppression of facts to trigger penal provisions. Referring to a previous case involving Centaur Pharma, where the penalty was dropped, the Tribunal emphasized that the issue of valuation of physician samples was not settled during the relevant period. Consequently, relying on the Supreme Court's decision in the case of Biochem Pharmaceuticals Ind Ltd., the Tribunal concluded that the penalty under Section 11AC was not applicable in this scenario. Given that the duty and interest were paid without contest, and in light of the judgments supporting the appellants' case, the Tribunal decided to waive the penalties imposed by the lower authorities. The duty demanded in the Order-in-Original was confirmed, and the appeals were allowed.

In conclusion, the Tribunal, comprising Shri Ramesh Nair and Shri Raju, granted relief to the appellants by waiving the penalties under Section 11AC, considering the circumstances of the case and the legal precedents cited in support of the appellants' position.