By TIOL News Service

MUMBAI, JAN 14, 2013: THE appellants are the manufacturers of P & P Medicines which are assessed under the provisions of Section 4A of the Central Excise Act 1944 based on maximum retail price less abatement of 35% /40%. It was noticed that the appellants are not discharging the duty liability correctly under Sec.4A of the Central Excise Act and on verification of the documents it was seen that the appellants had paid duty on the basis of lower value arrived at under Sec.4A of the Central Excise Act. For the purpose of central excise duty, they had calculated the assessable value after deducting central excise duty element from maximum retail price and thereafter claimed the deduction under Notification 2/05-CE(NT) and they had not paid the duty on the value arrived at by deducting abatement from maximum retail price.

Accordingly a SCN dated 31.3.08 was issued and the same was adjudicated by the CCE, Aurangabad who confirmed the duty of Rs.62,40,570/-, imposed equivalent penalty and interest.

The appellant is before the CESTAT and submits that they are contesting the order only on the ground of limitation. Inasmuch as it is submitted that vide their letter dated 10.01.2005 addressed to the Asstt. Commissioner they had specifically mentioned the manner of determination of AV of various products in an Annexure and hence the SCN dated 31.03.2008 is time barred.

The Revenue representative submitted that the letter dated 10.1.2005 was addressed to the Asstt. Commissioner on 28.1.2005 and in December, 2006, audit was conducted by the Department and objection regarding correct valuation of the goods was raised by the Audit and thereafter from February, 2007 the appellants started paying duty as per the computation undertaken by the department; that since the appellants had not declared the correct assessable value, extended period had rightly been invoked by the department and the demand confirmed by the Commissioner is sustainable.

The Bench observed -

"6. The letter dated 10.1.2005 addressed to the Asstt. Commissioner is reproduced below for sake of convenience:-

"Please find enclosed herewith product-wise Ass. Value details calculated on Retail Sales Price as per Notification No.2/2005-Central Excise (N.T.) dated 7.1.2005.

We are clearing our products by payment of Central Excise duty of Chapter Heading No. 3003.10 and 3003.20 on the Ass. Value calculated as per details enclosed.

We have calculated our Ass. Value on Retail sale price as per provisions of the Drugs (Price Control) Order, 1995 as explained in above Notification."

7. On going through enclosures to this letter we find that on the top of the enclosures it is stated "assessable value calculated on Retail Sale Price W.E.F. 8.1.2005 (as per Notfn. No.2/2005-CE (N.T.)" and thereafter the details are given in the tabular form as under:-

Product name Pack MRP MRP as per DPCO New Ass. Value as per MRP

Ecl.duty Notfn, WEF 8.1.05 (65% of

DPCO, MRP)

8. We find that in the Table given in the Enclosures there is no column showing the assessable value after abatement from the MRP.

9. For the sake of convenience Notification 2/05 dated 7.1.2005 is reproduced below:-

"x x x"

10. We find that under this Notification abatement of 35% is to be taken on the retail sale price of the goods and there is no provision under this Notification that the abatement is to be taken from the retail sale price excluding duty. We find that in the Table given in the Enclosures to their letter dated 10.1.2005 they have shown the MRP of the product but there is no column showing the assessable value after deducting abatement from the MRP. In the absence of which there is no assessable value shown of the products manufactured by them in the table though on the top of the table it is shown assessable value calculated on the retail sale price as per Notification No. 2/05. Therefore, we find that non-mentioning of correct assessable value as per Notification No.2/05 is clearly a willful misstatement by the appellants and the extended period under Sec. 11A is clearly invokable in this case.

11. We find that the appellants are working under self-assessment procedure and it is their duty to compute the correct assessable value and correct duty payable by them in their assessment documents. In the Enclosures to their letter they have not mentioned the correct assessable value and accordingly have not correctly computed the central excise duty payable by them for which show-cause notice demanding the differential duty has correctly been issued to them invoking the extended period of limitation.

12. When the audit was conducted at the appellants' unit in December, 2006 and the objection was brought to the notice, the appellants started payment of duty from February, 2007 even before the issue of show-cause notice in March, 2008. The appellants did not show their good conduct by way of payment of duty in respect of the past period and now they cannot claim that show-cause notice is hit by time limitation."

Concluding that the appellants had not correctly declared the assessable value and had not paid the duty correctly inasmuch they had willfully misstated the value in the Enclosures to their letter dated 10.1.2005, the Bench held that the extended period had been rightly invoked and the demand rightly confirmed by the CCE, Aurangabad along with imposition of penalty and interest.

In fine, the appeal was rejected.

(See 2013-TIOL-87-CESTAT-MUM)