2007 (12) TMI 45 - AT - Central Excise

Clearance of pharmaceutical goods(sutures) to Govt. Hospitals through dealers revenue contends that dealer s price should form the basis for A.V. of goods - dealer is an agent who get remuneration and the remuneration cannot be regarded as trade discount - No strong case for total waiver on the merits of the demand - nothing to indicate that the goods would be sold to the dealers at a price other than the price contracted. Prima facie no case of demand time barred. stay partly granted

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty
2. Assessment of assessable value of goods
3. Time bar for demand

Analysis:
1. The case involved applications for the waiver of pre-deposit of duty and penalty amounting to Rs. 58,63,318/- against the applicant for the clearance of pharmaceutical goods to Government Hospitals through dealers. The duty was confirmed for the period between March 2001 to December 2004, along with an equal amount of penalty imposed on the Vice President (Marketing). The contention was regarding the assessable value of the goods sold by the applicant to dealers and subsequently to Government hospitals, with the Department arguing that duty should be paid based on the dealer's price. The Tribunal observed that the manufacturer had quoted the price, accepted tenders, and directly supplied goods to Government hospitals, indicating that the dealers were acting as agents entitled to remuneration. The Tribunal found no strong prima facie case for a total waiver of the demand on the merits of the case.

2. Regarding the assessment of the assessable value of goods, the Tribunal analyzed the language of the contract and the role of dealers in the supply chain. It was noted that the dealers acted as agents for the manufacturer, and the price at which the goods were contracted to be sold to Government hospitals should form the assessable value for duty liability purposes. The Tribunal emphasized that the remuneration given to dealers could not be considered a 'trade discount,' indicating that the manufacturer's price was the appropriate basis for assessing duty.

3. The issue of time bar for the demand was also raised based on the period covered in the show cause notice dated 31-3-2006, spanning from March 2001 to December 2004. The applicant relied on a letter dated 24-5-2000 to argue against suppression of facts. However, the Tribunal found the letter insufficient to establish that there was no suppression, as it did not indicate any deviation from the contracted price with Government agencies. The Tribunal concluded that the demand was not barred by limitation, as the letter did not provide evidence to support the claim of selling goods to dealers at a price lower than the contracted price with Government agencies.

In the final decision, the Tribunal directed a pre-deposit of Rs. 15 Lakhs towards duty within 8 weeks, after which the pre-deposit of the balance duty and penalty would be dispensed with, and recovery stayed pending the appeals. Failure to comply with this direction would result in the vacation of stay and dismissal of appeals without prior notice. Compliance was required to be reported by a specified date.