Custom, Excise & Service Tax Tribunal
Cce, Bhopal vs M/S Lupin Ltd on 12 January, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. III DATE OF HEARING : 12/01/2016. DATE OF DECISION : 12/01/2016. Excise Appeal No. 1551 of 2007 with C.O. No. 238 of 2007 [Arising out of the Order-in-Appeal No. 265/CE/BPL/2006 dated 07/03/2007 passed by The Commissioner (Appeals), Customs & Central Excise, Bhopal.] For Approval and signature : Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? CCE, Bhopal Appellant Versus M/s Lupin Ltd. Respondent
Appearance Shri Vaibhav Bhatnagar, Authorized Representative (DR) for the appellant.
Shri B.L. Narasimhan, Advocate for the Respondent.
CORAM: Honble Shri S.K. Mohanty, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 50022/2016 Dated : 12/01/2016 Per. B. Ravichandran :-
The Revenue is in appeal against order dated 07/3/2007 passed by Commissioner (Appeals), Bhopal. The respondent also filed a Cross Objection and raised certain grievances against the same impugned order. The appeal and the cross objection are taken together for disposal.
2. The respondent are engaged in the manufacture of bulk drug and P&P Medicine liable to Central Excise Duty. They were clearing physician samples meant for free distribution as part of marketing strategy. A dispute arose regarding assessable value to be adopted for these physician samples for discharging Central Excise duty. The respondent/assessee was discharging duty in terms of Rule 11 readwith Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The value was arrived at on cost construction basis i.e. 110%/115% of the cost of production on the basis of Board Circular No. 643/34/2002-CX. dated 01/07/2002. The said Circular was superseded by Circular dated 25/4/2005 to the effect that valuation of such physician samples should be done in terms of Rule 4 of the said Rules. The respondent/assessee started paying Excise Duty on retail sale price w.e.f. 07/1/2005 on the various items sold on MRP but continued to pay duty on free physician samples on cost construction method. Proceedings were initiated against the respondent/assessee for demanding differential duty on these impugned goods on valuing them based on MRP price of such medicines. The Original Authority confirmed the differential duty for the period 07/1/2005 to 15/07/2005 and imposed a penalty on the respondent/assessee. For the period 14/07/2004 to 06/1/2005 the demand was dropped as it was held that correct duty has been paid in terms of Board Circular dated 01/07/2002.
3. The Revenue preferred appeal against the original order and the Commissioner (Appeals) vide his impugned order dated 07/3/2007 rejected the appeal holding the original order as correct.
4. Aggrieved by this order, the Revenue filed the present appeal. The learned AR reiterated the grounds of appeal. He submitted that Board Circular dated 25/4/2005 is clarificatory and the contents should have been given effect for the whole period of demand. The payment of duty by the respondent/ assessee prior to 07/1/2005 is also incorrect and the demand was made based on value to be adopted under Rule 4 of the Valuation Rules and not on the basis of MRP.
5. The learned Counsel appearing on behalf of the respondent submitted that they have filed a Cross Objection in this case. He submitted that Rule 4 is not applicable as MRP based goods sold are not to be considered as such goods vis-`-vis the physician samples. There is no legal basis to assume that while applying Rule 11, Rule 4 should be given preference over Rule 8. The learned Counsel for the respondent/assessee strongly contested the imposition of penalty stating that the Original Authority as well as the Appellate Authority have erred in imposing penalty in this case which involves pure legal interpretation on the method to be adopted for arriving at value of free samples of medicine distributed by the respondent/assessee. There is no ground to impose penalty especially when the respondent/assessee followed the instructions of the Board from 01/7/2002 which was later changed vide Circular dated 25/4/2005.
6. We have heard both the sides and examined appeal records. The Department appeal is to confirm the demand of differential duty for the period 14/7/2004 to 06/1/2005 in terms of value to be adopted under Rule 4 of the said Rules. We find that the respondent/assessee have correctly followed the valuation for the impugned goods in terms of Board Circular dated 01/7/2002. The Board has categorically stated that since the goods are not sold, Section 4 (1) (a) will not apply and the value has to be arrived at in terms of Valuation Rules. No specific Rule covered such a contingency. Except Rule 8 all other Rules cover the situation where a sale is involved. Hence, it was clarified that residuary Rule 11 will have to be adopted alongwith the spirit of Rule 8 and assessable value would be 115% of cost of manufacture of the said goods. We find in a similar situation that the Honble Supreme Court in the case of Biochem Pharmaceuticals Ind. Ltd. vs. CCE, Vapi reported in 2015 (322) E.L.T. 808 (S.C.) held that best judgment method in terms of Rule 7 of Erstwhile Central Excise (Valuation) Rules, 1975 is the correct method. The Tribunal in the case of Alkem Laboratories Ltd. vs. CCE, Daman reported in 2006 (203) E.L.T. 102 (Tri. Mumbai) held that physician sample distributed free of cost are to be valued under Rule 11 readwith Rule 8 of the Central Excise Valuation Rules. Similar view was held by the Tribunal in Alkem Laboratories Ltd. vs. CCE & CUS, Daman reported in 2007 (213) E.L.T. 684 (Tri. Ahmd.). Hence, we find no merit in the appeal filed by the Revenue. Accordingly, the same is liable to be dismissed.
7. In the Cross Objection filed by the respondent/assessee they have contested that for the whole impugned period they are liable to pay duty using the same cost construction method, as above. We find that the Honble High Court of Bombay in the case of Indian Drugs Manufacturers Association vs. Union of India reported in 2008 (222) E.L.T. 22 (Bom.) upheld the Circular dated 25/4/2005 issued by the Board and held that physician free samples should be valued in terms of Rule 4 of the Valuation Rules. As such, we find no merit in the contention of respondent/ assessee for the period post 07/1/2005. However, we find the respondent/assessee has been contesting the imposition of penalty from the beginning. We find that considering the above discussion, the issue involved in this case is one of interpretation of valuation provisions. The Board itself changed the view in 2005 superseding the instruction issued in 2002. As such, we find no justification to impose a penalty on the respondent/assessee on this issue.
8. In view of the above discussion and findings, we dismiss the appeal filed by the Revenue. The Cross Objection filed by the respondent/assessee is also dismissed except for the relief of setting aside the penalty imposed on them.
(Operative part of the order pronounced in the open court.) (S.K. Mohanty) Member (Judicial) (B. Ravichandran) Member (Technical) PK ??
??
??
??
6