2017 (10) TMI 550 - AT - Central Excise

Valuation - Physician samples - cost construction method - extended period of limitation - Held that - Surely, there has to be wilful misstatement or suppression or fraud with evidence that same was deliberate and was designed only with intent to evade payment of duty. This is certainly not the case - the matter was already in litigation with the department concerning refund application filed for the same clearances. In any case, there definitely had been considerable confusion in the method and manner of clearance of physician samples - demand hit by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Valuation of goods under Chapter heading 30 of CETA
- Adoption of cost construction method for physician samples
- Recovery of differential duty for specific periods
- Imposition of penalty under various provisions of the law
- Appeal against the Commissioner's order

Analysis:
The case involved manufacturers of medicines under Chapter heading 30 of CETA who adopted a cost construction method for valuing goods cleared as "Physician samples" instead of the correct method under Section 4(1)(b) of the Central Excise Act. Proceedings were initiated for recovery of differential duty for specific periods, along with penalties. The Commissioner's order dropped a significant portion of the demand but confirmed a portion for a specific period, imposing penalties. The appellants appealed, arguing various grounds.

During the hearing, the appellant's advocate cited a Supreme Court judgment regarding the assessment of physician samples under Section 4(1)(a) of the Central Excise Act. They also highlighted a previous refund application decision in their favor and correspondence regarding the cost of production method adopted. The appellant raised concerns about the invocation of the extended period of limitation and lack of justification for the demand for a specific period.

The department supported the adjudication, but upon review, the Tribunal found shortcomings in the justification for invoking the extended period of limitation. The Tribunal noted that there was no deliberate misstatement or fraud to evade duty, considering the confusion caused by conflicting circulars on valuation methods for samples. The Tribunal concluded that the demand was hit by limitation and legally unsustainable. As a result, the impugned order was set aside entirely, and the appeal was allowed with any consequential benefits as per law.