2017 (10) TMI 335 - AT - Central Excise

Short payment of duty - Revenue proposed the demand of duty on the ground that since the sets were cleared for evaluation/display purpose the Central Excise duty ought to have been discharged at specific rate of duty as per the N/N. 5/99 dated 28.2.1999, No.3/2001 dated 1.3.2001 and No.6/2002 dated 1.3.2002. Held that - the subject goods are not the standard products of the appellant but are modified / improved versions with additional facilities. These goods were stock transferred by the appellant to the branches initially for the purpose of evaluation/display as marketing strategy before commencement of their bulk commercial production. Though it is true that retail price was declared for the subject goods, the appellant admits that the goods were initially cleared for evaluation/display to the depots/branches of the appellant and finally sold to their employees at less than the retail price declared. When the subject goods are not factually meant for sale in the market in the normal course, the appellant s pleading that they have declared retail sale price, which has been the sole consideration for sale to the ultimate consumer, cannot make them entitled to the benefit of Notification No.6/2002 dated 1.3.2002 for clearance of their goods at the rate of duty at 16% under its Col. No.(i). Penalty - Held that - considering that the subject matter is an issue of interpretation of the wordings of the Notification, the penalty imposed on the appellant is hereby dropped. Appeal allowed in part.

Summary

Issues: Appeal against Order-in-Appeal sustaining demand of short paid duty, interest, and penalty; Interpretation of Notification No.6/2002 for clearance of goods at a specific rate of duty; Applicability of penalty under Rule 25 of Central Excise Rules, 2002 and Section 11AC; Evaluation of goods cleared for display purpose and subsequent sale to employees.

Analysis:
The appellant appealed against the Order-in-Appeal sustaining the demand of short paid duty, interest, and penalty. The case involved the interpretation of Notification No.6/2002 for the clearance of goods at a specific rate of duty. The appellant cleared Colour Televisions (CTVs) to branches for evaluation/display purpose, discharging duty liability based on the maximum retail price (MRP) indicated on the package. The Revenue proposed duty demand based on specific rates as per relevant notifications. The Show-cause notice proposed penalty under Rule 25 of Central Excise Rules, 2002 and Section 11AC, along with interest under Section 11AB of the Central Excise Act, 1944. The Assistant Commissioner confirmed the duty demand, interest, and imposed equivalent penalty, which was sustained by the Commissioner (A), leading to the appeal before the Tribunal.

Upon hearing both sides, the Tribunal noted that the subject goods were not standard products but modified versions transferred for evaluation/display before sale to employees. The appellant claimed the benefit of Notification No.6/2002, which requires the declaration of retail sale price as the sole consideration for sale to the ultimate consumer. However, since the goods were not meant for sale in the market in the normal course but for evaluation/display, the declared price did not represent the true retail sale price. The Tribunal agreed with the impugned order's findings, confirming the duty demand and interest but dropped the penalty due to the issue being an interpretation of the Notification.

The Tribunal distinguished the case from precedents where goods were removed for sale but RSP was not affixed to avoid higher duty, emphasizing that in this case, goods were transferred for evaluation/display, not sale. Therefore, the penalty imposed on the appellant was dropped. The impugned order was modified accordingly, partly allowing the appeal. The judgment was pronounced on 30.08.2017.