2024 (7) TMI 475 - AT - Central Excise

Method of valuation - Section 4 or 4A of the Central Excise Act, 1944 - removal of factory packaged medicines covered by the Standards of Weights and Measures Act (SWM Act) on stock transfer basis to Patna depot - demand of differential duty on the basis of transaction value in terms of Section 4 of the Central Excise Act from the appellant - HELD THAT - It is observed that MRP based valuation is applicable only for goods cleared for domestic sales, where the SWM Act is applicable. When goods are sold outside the country, such as Nepal, MRP based valuation is not applicable and the value to be adopted is the transaction value as provided under Section 4 of the Act. This view has been expressed by the Tribunal, New Delhi in the case of GILLETTE INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2005 (8) TMI 222 - CESTAT, NEW DELHI wherein it was observed that export consignments to Nepal were required to be valued in terms of their transaction value under Section 4 and not in terms of Section 4A, even if the goods under export were specified under Section 4A(1) of the Act. It is observed that the appellant has fairly accepted the valuation in terms of Section 4 of the Act for the goods cleared to Nepal from their depot at Patna and paid the differential duty before filing this appeal. Therefore, by relying on the decision of the Tribunal in the case of Gillette India Ltd. v. Commissioner of Central Excise, Jaipur, the demand of differential duty confirmed in the impugned order upheld along with interest. Penalty u/s 11AC of the Central Excise Act, 1944 - HELD THAT - When the Department contended that MRP based valuation is not applicable for the goods cleared to Nepal, the appellant accepted their liability and paid the differential amount of duty. Even though it was paid after issuance of the adjudication order, we observe that in this case, there is no mens rea or intention to evade payment of duty existing on the part of the appellant. As suppression of facts with intent to evade payment of duty is not established in this case, it is held that the penalty imposed under Section 11AC of the Central Excise Act, 1944 is not sustainable and accordingly, the same is set aside. Appeal disposed off.

Summary

Issues:
- Applicability of MRP based valuation under Section 4A for goods sold outside the country
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944

Analysis:

Applicability of MRP based valuation under Section 4A for goods sold outside the country:
The case involved M/s. Albert David Limited, engaged in manufacturing medicaments, who had sold packaged medicines to Nepal buyers from their Patna depot. The Department contended that MRP based valuation under Section 4A was only applicable for domestic sales, not for goods sold outside the country. The Department demanded differential duty based on transaction value under Section 4 of the Central Excise Act. The Tribunal observed that MRP based valuation is not applicable for goods sold outside the country, as evidenced in the case of Gillette India Ltd. v. Commissioner of Central Excise, Jaipur. The appellant accepted the valuation under Section 4 and paid the differential duty, leading the Tribunal to uphold the demand of duty confirmed in the impugned order along with interest.

Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The appellant contested the penalty imposed under Section 11AC, arguing they had no intention to evade duty. They cleared goods to their depot at Patna using MRP based valuation, unaware that some goods would be sold to Nepal buyers later. The Tribunal found merit in the appellant's submission, noting the absence of intent to evade duty. As the appellant accepted their liability and paid the differential duty after receiving orders from Nepal buyers, the Tribunal held that no mens rea or intention to evade payment of duty existed. Consequently, the penalty under Section 11AC was deemed unsustainable, and it was set aside in the judgment.

In conclusion, the Tribunal upheld the demand of duty with interest but set aside the penalty imposed under Section 11AC of the Central Excise Act, 1944. The appeal was disposed of with this decision.