Quantitative discounts not allowed while assessing value under MRP Based Valuation.

PJ/Case law/2013-14/1928

Case:-MACLEODS PHARMACEUTICALS LTD. VERSIS COMMISSINER OF C.EX., VAPI

Citation:-2013(296) E.L.T. 379 (Tri.-Ahmd.)

Brief Facts:-These appeals are filed by the assessee against Orders-in-Original Nos. OIO N0.14/DEM/DAMAN/2010, dated 21-10-2010 and OIO No. 15/DEM/DAMAN/2010, dated 22-10-2010. Though both the appeals are filed by same assessee for two units, as the issue involved being the same, we dispose of the said appeals by a common order.
The relevant facts that arise for consideration are that during the period January, 2005 to October, 2008 and January, 2005 to July, 2007 and the appellants were manufacturing pharmaceuticals goods falling under Chapter 30 of the Central Excise Tariff Act, 1985. During the relevant period, vide Notification No. 2/2005-C.E. (N.T.) dated 7-1-2005, provisions of Section 4A of the Central Excise Act, 1944, for the purpose of valuation for payment of Central Excise duty on PRP medicaments, were introduced, after eligible abatement at applicable rate with reference to the retail sale price. It was noticed by the lower authorities, on scrutiny of the records, the appellants had claimed quantitative discount and were not paying duty on free goods. The lower authorities under an impression that the appellant is liable to discharge duty on such free goods, as there are no provisions of granting of quantitative discount for the goods covered under provisions of Section 4A of the Central Excise Act, 1944 issued show cause notices dated 11-11-2009. The appellants contested the show cause notice on merits as well as on limitation. The adjudicating authority did not agree with the contentions of the assessee and holding against the assessee, confirmed the demands and also directed them to pay interest and also imposed penalties under various sections. Hence these appeals.

Appellant Contentions:-Learned counsel appearing on behalf of the appellants would submit that on merits they are not challenging the confirmation of the demands as the Larger Bench decision is against them. Learned counsel on the other hand would contest the confirmation of the demand on limitation. It is his submission that the appellants had been filing monthly returns with the authorities during the relevant period. It is his submission that the appellants had clearly indicated in their returns, information regarding the clearances of goods by claiming the quantitative discounts and clearly indicating in the excise returns as regards the said quantitative discount claimed by them. It is his submission that that the lower authorities did not at any point of time raise any question regarding the said clearances. In view of this, it is his submission that the demand is blatantly time barred. He would read the findings of the adjudicating authority on the question of limitation and submit that these findings are incorrect as the appellants had always been indicating the facts in their returns.

Respondent Contentions:-Learned departmental representative on the other hand would submit that the entire case of the assessee on the limitation is based upon the entries made by them in the RG-1 register. He would submit that the RG-1 register is never submitted to the range officer for scrutiny. He would submit that the returns which were submitted, had two quantitative clearances and there was one assessable value which would indicate that quantity cleared on the normal clearance and as quantitative discount and there was a composite consisting of the same value. It is his submission that if a specific product attracts more than one rate of duty then all the rates thereof should have been mentioned separately by the assessee which in this case was not mentioned. He would reiterate the findings of the adjudicating authority.

Reasoning of Judgment:-We have considered the submission from both sides, we find that the issue involved in this case is regarding the confirmation of the demand of the liability on the assessee on the goods cleared by claiming quantitative discount from the clearances affected by them as claiming reduction for discounts as enshrined in provisions of Section 4 of the Central Excise Act, 1944. Provisions of Section 4A of the Central Excise Act, 1944 do not adopt provisions of Section 4 for extending the benefit of any trade discount/further discounts, as the provisions of Section 4A and the notifications issued thereunder consider all the discounts and allow abatement from the retail sale price to an assessee. We find that on merits appellants do not have a case about non-discharge of duty liability on the quantitative discounts claimed by them during the period when the provisions of Section 4A of the Central Excise Act, 1944 was made applicable to the products manufactured by them.
However, we find that the issue involved in this case is for the period January, 2005 to October, 2008 and January, 2005 to July, 2007. During the relevant period, it is undisputed that the appellant had been filing the monthly ER-1 returns to the lower authorities. It is also seen that the said monthly returns had a column which indicated "removal from the factory without payment of duty" wherein the appellants herein had been filling the details and clearly indicating the quantity of P or P medicaments cleared were without payment of duty under quantitative discount. This ER-1 returns were accepted by the lower authorities and there is nothing on record to show that the lower authorities had sought clarification from the assessee as regards the quantity cleared under quantitative discount without payment by them. In the absence of any such correspondence, we find that the adjudicating authority has erred in holding against the assessee on the question of limitation. We find that the adjudicating authority while holding against the assessee-appellant on limitation has recorded the findings in his Order-in-Original at paragraph 4.9.3.2, 4.9.3.3 and 4.9.3.3.1. In our considered view, the findings recorded by the adjudicating authority are devoid of merits, inasmuch as, it is an acknowledgement of the adjudicating authority that ER-1 returns were filed but did not mention in the particular columns regarding the clearances of P or P medicaments without payment of duty under quantitative discounts. The adjudicating authority has erred on the point of limitation as the lower authorities had never questioned or sought clarification from the assessee as regards the quantitative discounts claimed by them on the products covered under Section 4A of the Central Excise Act, 1944. In the absence of any correspondence, we have to hold that the demands confirmed by the adjudicating authority against both the appellants is blatantly hit by limitation and the assessee has not suppressed any material fact from the lower authorities.
Accordingly, the impugned orders are set aside on the ground of limitations and the appeals are allowed.

Decision:-Appeals are allowed.

Comment:-The essence of this case is that sometimes the ground of limitation becomes the strong factor in deciding the appeal. The present appeal was not maintainable on merits but solely on the basis that there was no suppression of facts, the extended period of limitation was held to be not invokable and consequently the appeal was allowed.

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