By TIOL News Service

MUMBAI, JULY 14, 2018: REVENUE filed the appeal only to challenge the dropping of penalty by Commissioner (A). The assessee also filed Cross Objection wherein they have challenged the merit of case under which the demand of duty was confirmed.

Assessee during the period May 2005 to February 07 had cleared physician samples by determining the value on the basis of cost of 100% and paid Central Excise duty on the said physician samples. Department contends that assessee should have determined the value on pro-rata basis. Thus the respondent had under-valued the impugned physician samples which resulted in short levy of duty. SCN was issued and Adjudicating authority confirmed the demand.

On appeal, Commissioner (A) upheld the impugned order inasmuch as it confirmed the demand of duty. However, the penalty imposed by adjudicating authority was set aside on the ground that the case involved technical issue of interpretation of provision of Section 4A or Section 4 of CEA, 1944.

Revenue submits that demand was confirmed by invoking extended period that means there was suppression of fact on the part of assessee. Therefore, the Commissioner (A) had no power to drop the penalty imposed under Section 11AC of CEA, 1944 as held by Apex Court in case of Rajasthan Spinning and Weaving Mills 2009-TIOL-63-SC-CX .

This issue has been considered by Tribunal in case of Cosme Remedies Ltd. 2016-TIOL-821-CESTAT-MUM.

Tribunal held that -

++ Assessee is clearing the physician samples not freely but on sale basis to the brand name owner. Therefore, the sale price is available. Therefore, the valuation has to be determined in terms of Section 4(1)(a) of Central Excise Act, 1944.

++ The valuation on pro-rata basis can only be applied when the transaction value is not available in such case the valuation has to be determined in accordance with Section 4(1)(b) and valuation rules made thereunder.

++ The assessee sold their goods to their buyers on transaction value therefore, pro-rata basis cannot be applied accordingly the demand raised by Revenue does not sustain.

In view of settled position, the demand does not sustain. Therefore, impugned order is set aside and the Cross Objection is allowed. As the demand is not sustainable, question of penalty does not arise. Consequently Revenue's appeal fails and accordingly dismissed.

(See 2018-TIOL-2151-CESTAT-MUM)