2017 (11) TMI 1509 - AT - Central Excise

Valuation - physician samples (distributed free of cost) - Rule 8 of the Central Excise Valuation Rules - CBEC Circular no.643/34/2002-CX dated 01.07.2002 - Held that - Rule 8 of the Central Excise Valuation Rules cannot be used for valuation of the physician s samples cleared by the appellants free of cost, and in such circumstances Rule 4 of the Valuation Rules would be applicable. Time limitation - penalty - Held that - in the absence of any evidence to support the allegation of suppression, misrepresentation, extended period of limitation cannot be invoked - penalty under Section 11AC also set aside. The demand of duty and interest for normal period upheld - appeal allowed in part.

Summary

Issues:
Appeal against confirmation of demand and penalty imposition, Assessment under Rule 8 vs. Rule 4 of Central Excise Valuation Rules, Application of CBEC Circulars, Interpretation of previous tribunal decisions, Limitation period for show-cause notice, Imposition of penalty under Section 11AC.

Analysis:
The appeal was filed challenging the demand confirmation and penalty imposition by Bora Pharma Pvt. Ltd. The appellants argued that they were manufacturing medicaments and distributing physician's samples free of cost among Doctors, assessing goods under Rule 8 of the Central Excise Valuation Rules based on CBEC Circular no.643/34/2002-CX. However, the Revenue sought duty recovery for the samples under Rule 4 of Valuation Rules, 2000 per CBEC circular no.813/10/2005-CX. The High Court upheld the latter circular, leading to demand notices for April 2005 to March 2007 and penalty imposition. The appellants cited tribunal decisions like Anglo French Drugs & Indus. Ltd. and Twenty First Century Pharmaceuticals Pvt. Ltd. to support their case, also referring to Alicon Pharma P. Ltd. and Zyg Pharma Pvt. Ltd. on the limitation issue.

Upon review, the Tribunal found that the appellants were valuing physician's samples under Rule 8, contrary to the assessment under Rule 4 upheld in the case of Twenty First Century Pharmaceuticals Pvt. Ltd. and the differing facts in Zyg Pharma Pvt. Ltd. The decision in Anglo French Drugs & Indus. Ltd. was rendered without considering the High Court's ruling in Indian Drug Manufacturers Association, indicating Rule 4 application for free samples. Thus, the appeal was dismissed on merit grounds.

Regarding the limitation issue, the show-cause notice period exceeded the normal limitation timeframe. The extended limitation was invoked due to alleged failure in notifying revenue about duty payment method pre-CBEC circular no.813/10/2005-CX. As there was no proof of suppression or misrepresentation, the extended limitation and penalty under Section 11AC were deemed inapplicable. The demand and interest within the limitation period were upheld, resulting in a partial allowance of the appeal.

In conclusion, the Tribunal's decision was pronounced on 23/10/2017, addressing the conflicting valuation rules application, interpretation of circulars, tribunal precedents, limitation period invocation, and penalty imposition under Section 11AC, ultimately partially allowing the appeal based on the outlined terms.