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2018 (7) TMI 163 - AT - Central ExcisePenalty u/s 11AC - Valuation - physician samples - Method of valuation - whether the penalty under Section 11AC of Central Excise Act, 1944 is imposable or not? - Held that - It is a matter of record that the appellants have voluntarily complied and made good of the short payment of duty, which has arisen by sheer ignorance on the part of them about the new procedure for Valuation of physician samples provided by CBEC vide their Circular No.813/10/2005-CX dated 25.04.2005. It is also matter of record that as soon as, the short payment was pointed out, the appellants have voluntarily paid the Central Excise duty including interest thereon There was no intent to evade, rather due to ignorance, the appellant continued to pay Central Excise duty as per previous Guidelines of the CBEC and as soon as they came to know of the new Guidelines issued in 2005, they have paid the differential amount of Central Excise duty with interest - the short payment of Central Excise duty which was later on made good by making payment of equal amount of Central Excise duty, has resulted only because of ignorance and not because of any intention to evade duty and therefore, the provisions of Section 11AC in this case, are not invokable and no penalty under this Section is imposable. Penalty set aside - appeal allowed in part.
Issues:
- Valuation of physician samples under Central Excise Tariff Act, 1985 - Allegation of short payment of duty - Imposition of penalty under Section 11AC of the Central Excise Act, 1944 - Compliance with new Valuation Guidelines issued by CBEC - Intent to evade Central Excise duty Analysis: The appeal in this case pertains to the valuation of physician samples under Chapter Heading No.3004 of the Central Excise Tariff Act, 1985. The Department alleged that the appellant undervalued physician samples, resulting in a short payment of duty amounting to ?9,01,455. The dispute arose due to the appellant's use of Rule 8 of the Central Excise Valuation Rules, 2000, instead of Section 4(1)(b) of the Central Excise Act, 1944, and Rule 4 of the Valuation Rules. The appellant contended that they were unaware of the new Valuation Guidelines issued by CBEC in 2005 and had been following earlier instructions. The appellant promptly deposited a portion of the duty and interest upon discovering the discrepancy, arguing that the penalty under Section 11AC of the Central Excise Act should not apply due to their lack of intent to evade duty. The key issue before the Tribunal was whether the penalty under Section 11AC was warranted. The Tribunal observed that the appellant rectified the short payment upon notification and voluntarily paid the outstanding duty and interest. It noted that Section 11AC requires intent to evade duty, which was absent in this case. The Tribunal referenced the judgment in Commr. of Central Excise, Chandigarh Vs. Pepsi Foods Ltd., emphasizing the necessity of 'mens rea' for penalty under Section 11AC. Since there was no evidence of fraud or intent to evade duty, the Tribunal concluded that the penalty was not applicable. Consequently, the Tribunal set aside the Order-in-Appeal regarding the imposition of penalty under Section 11AC, allowing the appeal in part. In summary, the Tribunal's decision focused on the appellant's compliance with the new Valuation Guidelines, the absence of intent to evade duty, and the application of penalty under Section 11AC. By considering the appellant's actions in rectifying the discrepancy and the lack of fraudulent intent, the Tribunal concluded that the penalty was unwarranted in this case, aligning with the principles outlined in the referenced Supreme Court judgment.
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