2017 (11) TMI 602 - AT - Central Excise

Valuation - physician samples of medicament - case of the department is that valuation of physician sample should have been done in accordance with provision of Section 4(1)(b) of Central Excise Act, 1944 read with Rule 4 of the Central Excise Valuation Rule, 2000 read with Board Circular dated 25-4-2005 - extended period of limitation - Held that - firstly department itself has raised issue that the valuation should be done as per 110% of the cost of production. Accordingly the respondent was paying duty on 110% therefore it cannot be said that department was not aware of the fact regarding the method of valuation adopted by the respondent - secondly, the issue was debatable and various contrary decisions were existing during the relevant period therefore respondent have rightly entertained the bonafide belief. There is no suppression of facts on the part of the respondent, accordingly, order passed by the Ld. Commissioner cannot be interfered with - appeal dismissed - decided against Revenue.

Issues:
Valuation of physician samples for Central Excise duty payment; Application of Section 4(1)(b) of Central Excise Act, 1944; Interpretation of law on valuation; Suppression of facts; Penalty imposition under different sections; Appeal against dropping of demand for extended period.

Analysis:
1. Valuation of Physician Samples: The case involved the valuation of physician samples of medicament for Central Excise duty payment. The department contended that valuation should have been done in accordance with Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 4 of the Central Excise Valuation Rule, 2000, and a Board Circular. The respondent had adopted a valuation method of 110% of the cost of production. The department raised a demand for differential duty, which was confirmed along with a penalty.

2. Suppression of Facts and Penalty Imposition: The Revenue argued that the respondent suppressed facts by not following the Board Circular on valuation, leading to the dropping of the demand on the grounds of the extended period being time-barred. The department claimed that the respondent did not disclose the short payment until after an investigation began, indicating suppression. The respondent, on the other hand, argued that they had a bonafide belief in the legality of their valuation method, which was also reflected in their monthly returns.

3. Interpretation of Law and Precedents: The respondent's counsel highlighted that the issue revolved around the interpretation of law concerning the valuation of physician samples, citing various cases and a final decision by the Hon'ble Bombay High Court. The respondent argued that there was no suppression of facts as the valuation method and duty payments were disclosed in their monthly returns, and the department was aware of the same.

4. Decision and Upholding of Impugned Order: The Tribunal found that there was no dispute on the duty demand, which was admitted by the respondent. The appeal by the Revenue was based on the limitation issue, where the Commissioner had dropped the demand for the extended period. The Tribunal upheld the impugned order, stating that there was no suppression of facts on the part of the respondent and that the issue was debatable with conflicting decisions during the relevant period. The Tribunal dismissed the Revenue's appeal, emphasizing the bonafide belief of the respondent and the settled interpretation of law in the case of Indian Drugs Manufacturers Assocn.

In conclusion, the Tribunal upheld the decision of the Commissioner, dismissing the Revenue's appeal based on the lack of suppression of facts by the respondent and the settled interpretation of law regarding the valuation of physician samples.

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