2024 (11) TMI 1124 - AT - Central Excise

Time Limitation - Recovery of differential duty with interest and penalty - whether the demand is barred by limitation? - whether the demand is barred by limitation or not - HELD THAT - It is found that initially the view of the department was that the clearance of samples free from the factory leviable to duty and the value should be determined adopting Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Later, the same was reconsidered and it was clarified that the proper rule for determination of value of free samples cleared from the factory would be Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The Hon ble High Court of Bombay in the case of INDIAN DRUGS MANUFACTURER'S ASSOCN. VERSUS UNION OF INDIA 2006 (9) TMI 94 - BOMBAY HIGH COURT case held that the value of physician samples cleared free be determined by adopting Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. There was no suppression or misdeclaration on the part of the appellant with intent to evade payment of duty. Consequently, the demand with interest be limited to the normal period of limitation. Under these circumstances, penalty is also not imposable. The impugned order is modified to the extent of setting aside the demand for the extended period of limitation and the demand for normal period is upheld with interest. As issue pertains to interpretation of law, no penalty is imposable. Appeal is partly allowed.

Summary

Issues:
1. Whether the demand is barred by limitation.

Analysis:
The case involved an appeal against an Order-in-Appeal passed by the Commissioner (Appeals) regarding the valuation of excisable goods cleared for trial and demonstration purposes. The appellant, engaged in the manufacture of specific tools falling under Chapter 82 of the Central Excise Tariff Act, had cleared goods to their sales engineers for demonstration at customers' locations. The Department issued a show-cause notice alleging that the valuation method used by the appellant was incorrect, as Rule 4 should have been applied instead of Rule 8 of the Central Excise Valuation Rules. The notice proposed to recover differential duty for a specific period. The appellant argued that the extended period of limitation invoked by the Department was unwarranted, as there was no suppression or misdeclaration of facts on their part.

The Tribunal considered the facts and legal principles involved. It noted that initially, there was confusion regarding the appropriate valuation rule for goods cleared for demonstration purposes. While the Department initially considered Rule 8 applicable, it later clarified that Rule 4 should be used. The Tribunal referred to judgments by the Bombay High Court and the Karnataka High Court, which supported the application of Rule 4 for valuation. Given the unsettled legal position and differing views on the matter, the Tribunal held that invoking the extended period of limitation was not justified. The appellant had communicated their valuation methodology to the Department back in 2001, indicating no intent to evade duty payment. Therefore, the Tribunal concluded that there was no suppression or misdeclaration by the appellant.

Consequently, the Tribunal modified the impugned order, setting aside the demand for the extended period of limitation. The demand for the normal period was upheld with interest. Since the issue primarily involved the interpretation of law and not willful non-compliance, no penalty was imposed. The appeal was partly allowed based on these findings.