1. This is an appeal filed by the Appellant against the impugned Order-in-Appeal No. 35/Kol.V/2010 dt. 31.03.2010 passed by Commissioner of Central Excise (Appeals), Kolkata.
2. Brief facts of the matter are that the appellants are manufacturer of Patent and Proprietary Medicaments classifiable under Chapter Heading No. 3004 of Central Excise Tariff Act, 1985. It has been allegation of the Department that the appellants have removed the physician samples from their manufacturing factory during the period from April, 2005 to February, 2007 by adopting valuation of their physician samples as per provisions of Rule 8 of Central Excise Valuation Rules, 2000. Rather than following the provisions of Section 4 (1)(b) of the Central Excise Act, 1944 read with the provisions of Rule 4 of the Central Excise Valuation Rules, 2000, as well as CBEC's Circular No. 813 -CX dated 25.04.2005., it had been alleged that wrong practice adopted by the appellant in valuing the physician samples resulted into short payment of duty of Rs. 9,01,455/-. The Show-cause notice dated 04.01.2008 came to be adjudicated by the Order-in-Original dated 27.11.2008 wherein the above amount of duty was confirmed under Section 11A of the Central Excise Act, 1944 and equal amount of penalty had been imposed under Section 11AC of the Central Excise Act, 1944 by the Adjudicating Authority. Interest under Section 11AB was also confirmed.
3. The appellants have gone before the ld. Commissioner (Appeals) against the above mentioned Order-in-Original dated 27.11.2008, but the ld. Commissioner (Appeals) was pleased to ditto Order-in-Original of the original adjudicating authority. The appellants are before us against the above mentioned Order-in-Appeal No. 31.03.2010 on the ground that the appellant was genuinely not aware about the new Valuation Guidelines for physician samples issued by CBEC vide their Circular No. 813/10/2005-CX dated 25.04.2005 and they had been discharging their Central Excise liability, on clearance of physician samples as per CBEC's earlier instructions issued vide Circular dated 01.07.2002.
4. That subsequent to the short payment of Central Excise duty as pointed out, they have immediately deposited an amount of Rs. 4,08,000/- and remaining amount of Central Excise duty of Rs. 4,93,455/- and interest of Rs. 1,92,046/- was deposited by them with the Revenue. The appellant has been arguing that since they have no intention to avoid Central Excise duty on account of undervaluing the physician's samples, rather they were following the Guidelines provided by CBEC vide their earlier Circular dated 1st July, 2002 and since the entire amount of duty as well as interest has already been paid by them before the matter came to be adjudicated, penalty under Section 11AC of Central Excise Act, 1944, was not imposable on them.
5. We have heard the ld. D.R. for the Revenue, who has reiterated the grounds on which penalty has been imposed by the ld. Commissioner (Appeals).
6. We have heard both sides and also perused the record of the appeal.
7. At the outset, it is to mention that the ld. Advocate for the appellant has categorically mentioned and given in writing that he is not opposing the confirmation and payment of differential amount of Central Excise duty as confirmed under impugned Order-in-Original and Order-in-Appeal.
8. The short question before us in this case is whether the penalty under Section 11AC of Central Excise Act, 1944 is imposable or not? It is a matter of record that the appellants have voluntarily complied and made good of the short payment of duty, which has arisen by sheer ignorance on the part of them about the new procedure for Valuation of physician samples provided by CBEC vide their Circular No. 813/10/2005-CX dated 25.04.2005. It is also matter of record that as soon as, the short payment was pointed out, the appellants have voluntarily paid the Central Excise duty including interest thereon. The provisions of Section 11AC of Central Excise Act, 1944, provides that penalty can only be imposed where there is an intention to evade Central Excise duty. In this case, we find that there was no intention to evade Central Excise duty rather due to ignorance, the appellant continued to pay Central Excise duty as per previous Guidelines of the CBEC and as soon as they came to know of the new Guidelines issued in 2005, they have paid the differential amount of Central Excise duty with interest. In these circumstances, we find that the elements of fraud, collusion or any willful mis-statement or suppression of facts with intent to evade payment of duty, are not present in this case as required for imposing penalty under Section 11AC of the Central Excise Act, 1944. In view of this, we find that the short payment of Central Excise duty which was later on made good by making payment of equal amount of Central Excise duty, has resulted only because of ignorance and not because of any intention to evade duty and therefore, the provisions of Section 11AC in this case, are not invokable and no penalty under this Section is imposable. While holding the above view, we also take shelter of the judgement of the Hon'ble Supreme Court in the case of Commr. of Central Excise, Chandigarh v. Pepsi Foods Ltd : 2010 (260) ELT 481 (S.C.) The relevant extracts are reproduced here below :
"19. From a perusal of the aforesaid section, especially the underlined portion, it is clear that in order to attract the penalty provision under Section 11AC, criminal intent or 'mens rea' is a necessary constituent. In the reply to the show cause notice the stand which has been taken by the respondent is that it has been paying the duty and there is no mala fide intention on its part to evade the payment of duty. The further stand is that the goods were cleared from the factory only on payment of duty. This stand which has been taken in the reply to the show cause notices was not found to be incorrect in the order-in-original. As such the imposition of penalty of the equal amount of duty under the order-in-original cannot be sustained.
20. It is well settled that when the statutes create an offence and an ingredient of the offence is a deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires 'mens rea' as a necessary constituent of such an offence. But when factually no fraud or suppression or misstatement is alleged by the revenue against the respondent in the show cause notice the imposition of penalty under Section 11AC is wholly impermissible.
24. Following th
Please Login To View The Full Judgment!
e aforesaid well settled principles, this Court quashes that part of the order-in-original which imposes penalty without any finding of fraud or mis-statement against the respondent. This part of the order-in-original is quashed. Save as aforesaid, the order-in-original is upheld. These appeals filed by the revenue are allowed to the extent indicated above. No costs." 9. In view of the above, we are of the opinion that there is no merit in the Order-in-Appeal dated 31.03.2010 so far as imposition of penalty on the appellant is concerned and therefore, we set aside the Order-in-Appeal dated 31.03.2010 only with regard to imposition of penalty under Section 11AC of the Central Excise Act, 1944. 10. As a result, the appeal is allowed in part.