Custom, Excise & Service Tax Tribunal
Emcure Pharmaceuticals Ltd vs Pune I on 2 April, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/53/2008
[Arising out of Order-in-Original No. 16/CEX/2007 dated 29/11/2007 passed by the Commissioner of Central Excise, Pune I.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Emcure Pharmaceuticals Ltd.
Appellant
Vs
Commissioner of Central Excise
Pune I
Respondent
Appearance:
Shri, R.G. Sheth, Advocate for the appellant Dr. B.S. Meena, Additional. Commissioner (A.R.) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 02/04/2014 Date of decision: 17/04/2014 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal is directed against Order-in-Original No. 16/CEX/2007 dated 29/11/2007 passed by the Commissioner of Central Excise, Pune I Commissionerate. Vide the impugned order, a duty demand of ` 1,51,38,431/- has been confirmed against the appellant, M/s. Emcure Pharmaceuticals Ltd., Unit Nos. II, IV, V and Hinjewadi Unit along with interest thereon and also imposing equivalent amount of penalty.
2. The facts relevant to the case are as follows:
2.1. The appellant is a manufacturer of P or P medicines falling under Chapter 30 of the Central Excise Tariff Act, 1985. The medicines manufactured by the appellant are notified under Section 4A of the Central Excise Act and the duty liability has to be discharged in terms of the said section. The dispute in the present case relates to the physician samples manufactured by the appellant for its own purposes and the physician samples manufactured for other brand owners/ manufacturers of medicines. These physician samples are distributed free-of-cost and therefore, they do not come under the purview of Section 4A. The appellant discharged duty liability on these physician samples under Rule 8 of the Central Excise Valuation Rules, 2000 read with Section 4(1)(b) of the Act, i.e., on the cost construction plus 10% basis. The Revenue was of the view that the assessment of physician samples under rule 8 is incorrect and the correct method of determination of value would be under Rule 4 of the Central Excise Valuation Rules and accordingly issued a notice for differential duty for the period 08/01/2005 to 06/11/2006. The differential duty demand was ` 4,99,690/- in respect of appellants own physician samples distributed free-of-cost and ` 1,46,38,741/- in respect of physician samples sold to other major pharmaceutical companies. The duty demands were confirmed. During the investigation the appellant also made a voluntary payment to the extent of ` 1,32,61,433/- which was appropriated. Aggrieved of the same the appellant is before us.
3. The learned counsel for the appellant makes the following submissions.
3.1. As regards the physician samples manufactured and sold by the appellant to other major pharmaceuticals, this Tribunal in the case of Themis Laboratories Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai 2012 (286) ELT 244 had held that such samples are assessable to duty at the transaction value i.e., at the contract price agreed to with the buyers of the samples and therefore, the duty demands based on Rule 4 of the Central Excise Valuation Rules would not sustain in such cases. The learned counsel also relies on the decision of the Tribunal in the case of Parnax Lab Pvt. Ltd. vs. Commissioner of Central Excise, Vapi 2011-TIOL-1668-CESTAT-AHM would also apply wherein it was held that the duty liability has to be discharged on the transaction value under Section 4. The said decision was based on the decision of the honble apex Court in Sidmark Laboratories (India) Ltd. in Civil Appeal No. D/1456 of 2009.
3.2. As regards the physician samples manufactured on their own account and distributed free-of-cost, the matter has been settled by the Larger Bench of this Tribunal in the case of Cadila Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Ahmedabad 2008 (232) ELT 245 wherein it was held that Rule 4 of the Central Excise Rules would apply to valuation of such physician samples.
3.3. The learned counsel for the appellant further submits that the demands are also partly time-barred inasmuch as the show cause notices have been issued only on 18/06/2007for the period January 2005 to February 2006. Therefore, the demands for the period prior to June 2006 would be clearly time-bared.
4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, relies on the decision of this Tribunal in the case of Cadila Pharmaceuticals Ltd. (supra) and submits that in the case of physician samples, the valuation has to be done in terms of Rule 4 of the Central Excise Valuation Rules and not in terms of Rule 8 and accordingly he pleads for sustaining the impugned order.
5. We have carefully considered the submissions made by both the sides.
5.1. As regards the physician samples manufactured by the appellant for their own purposes and distributed free-of-cost to the Doctors, valuation has to be done not on the basis of cost-construction method but under Rule 4 of the Central Excise Valuation Rules as held by the Larger Bench of this Tribunal in the case of Cadila Pharmaceuticals Ltd. (supra). Therefore, the demand to the extent of ` 4,99,690/- is sustainable in law on merits.
5.2. As regards the physician samples sold to other pharmaceutical manufacturers, this Tribunal in the case of Themis Laboratories Pvt. Ltd.(supra) as also in the case of Gelnova Laboratories (I) Pvt. Ltd. vs. Commissioner of Central Excise, Belapur 2014-TIOL-172-CESTAT-MUM had held that, in such cases, the assessment has to be done on transaction value basis. Therefore, the contention of the department that the goods have to be assessed under Rule 4 of the Central Excise Valuation Rules, 2000 is not sustainable in law. Therefore, the demand to the extent of ` 1,46,38,741/- is clearly not sustainable in law and the appellant would be eligible for consequential relief, if any, in accordance with law.
5.3. As regards the time-bar plea taken by the appellant, the period of demand in the present case is from 08/01/2005 to 06/11/2006. The question whether Rule 4 or Rule 8 of the Central Excise Rules would apply in respect of physician samples, the issue was settled by the decision of the Tribunal in the case of Cadila Pharmaceuticals Ltd. (supra). The said decision was rendered on 26/09/2008. Prior to that date there were contrary views and, therefore, extended period of time cannot be invoked for confirmation of duty demand. It is a settled position that when a matter is referred to a Larger Bench, extended period cannot be invoked as held by the honble High Court of Gujarat in the case of Commissioner of Central Excise vs. Charak Pharma Pvt. Ltd. 2012 (278) ELT 319 (Guj.). Therefore, in respect of the physician samples manufactured for appellants own purpose, the duty demand will sustain only for the normal period of limitation, i.e., for the period June 2006 to November, 2006. However, inasmuch as the appellant has already paid the duty amount, the appellant would not be eligible for any refund of the same in the light of the decisions of this Tribunal in the case of India Cements Ltd. 1984 (18) ELT 499 and Supreme Woolen Mills 2004 (167) ELT 439 and the decision of the honble High Court of Kerala reported in AIR 1966 Ker. 121. Interest liability would also accrue in respect of the duty demands confirmed for the normal period of limitation.
6. Thus, the appeal is partly allowed in the above terms.
(Pronounced in Court on 17/04/2014) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 2