2000 (9) TMI 284 - AT - Central Excise

Issues Involved:
(i) Recovery of Rs. 7,29,557/- as Central Excise duty on physician's samples of medicines for the period October '95 to September '96.
(ii) Recovery of Rs. 17,31,997/- as duty on medicines allegedly clandestinely removed from the factory during the period 1-4-1996 to 24-9-1996.
(iii) Imposition of interest and penalty as proposed in the show cause notice.
(iv) Invocation of the extended period of limitation for the above demands.

Issue-wise Detailed Analysis:

1. Recovery of Rs. 7,29,557/- as Central Excise duty on physician's samples:
The appellants, manufacturers of P & P medicines, were found to have cleared physician's samples without payment of duty, valued at Rs. 50,28,692/-, for the period October 1995 to September 1996. The appellants contended that they believed the samples were exempt under Notification No. 171/70-C.E., which was rescinded by Notification No. 64/94-C.E. The Managing Director and Accountant admitted to clearing the samples without payment of duty. The appellants paid Rs. 2,71,558/- in January 1998 towards duty on the samples. The adjudicating authority did not consider this payment while confirming the demand of Rs. 7,29,557/-. The Tribunal found the Commissioner's order holding the appellants liable for duty well-founded but noted the order was not a speaking order on the valuation dispute and did not consider payments made by the appellants. The matter was remanded for de novo quantification of the duty after fresh valuation and considering the payments already made.

2. Recovery of Rs. 17,31,997/- as duty on clandestinely removed medicines:
The Department relied on the M.O. register resumed from the appellants' factory, showing discrepancies between the quantity of goods despatched and the quantity shown in excise records. The Managing Director and Accountant admitted to these discrepancies. The Department found that the goods were being cleared to the appellants' depot and marketed through their agency, M/s. Jawa Laboratories. The appellants contended that the discrepancies were due to double entries made by the gate-keeper. The adjudicating authority rejected this explanation, finding no evidence of a depot within the factory premises or that duty had been paid on the goods. The Tribunal upheld the finding of clandestine removal, noting the appellants failed to disprove the evidence from the M.O. register and Batch Register, and confirmed the demand of Rs. 17,31,997/-.

3. Imposition of interest and penalty:
The Tribunal agreed with the appellants that neither interest under Section 11AB nor mandatory penalty under Section 11AC could be imposed as these provisions were brought into force after the periods of dispute. The interest and penalty imposed were set aside.

4. Invocation of the extended period of limitation:
The Department alleged suppression of facts by the appellants, who failed to disprove this allegation. The appellants contended that the Department was aware of their manufacturing and clearance processes due to frequent visits by authorities. The Tribunal found these submissions unconvincing due to lack of proof and upheld the invocation of the extended period of limitation under the proviso to Section 11A.

Order:
(i) The demand of Rs. 17,31,997/- for clandestinely removed products is upheld.
(ii) The recovery of interest and penalty of Rs. 24,61,554/- is set aside.
(iii) The demand of Rs. 7,29,557/- for physician's samples is set aside, and the matter is remanded for de novo quantification after fresh valuation and considering payments already made.
The appeal is disposed of accordingly.

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