2018 (2) TMI 994 - AT - Central Excise

Tribunal allows appeals on medicine valuation, remands for unjust enrichment, sets aside interest and penalty

M/s. Caplin Point Laboratories Ltd. Versus CCE, Pondicherry

The Tribunal allowed the appeals concerning the valuation of P&P medicines for duty payment and assessment of physician samples for free distribution. ... Refund claim - P or P Medicaments - case of Revenue is that there is no erroneous payment of duty on the physician samples and hence question of refund of duty does not arise - Held that: - Hon’ble Supreme Court in CCE, SURAT Vs. SUN PHARMACEUTICALS INDS. LTD.- 2015 (12) TMI 670 - SUPREME COURT, whereby it has been held that in such cases the valuation would be covered by Section 4 (1) (a) of the Central Excise Act, 1944, on the basis of the contract price between the two parties - refund eligible - for the limited purpose of examining whether the refund so sanctioned would be hit by unjust enrichment, the matter are remanded back to the original authority. Demand of interest - penalty - delayed payment of duty - Held that: - As we have already decided the primary issue in favour of the appellants in respect of other two appeals on the refund matter, this appeal is also allowed by setting aside the portion of the impugned order relating to upholding of demand of interest amount of ₹ 4,54,419/- and penalty of ₹ 2,000/- - interest and penalty set aside. Appeal allowed by way of remand. Issues involved:1. Valuation of P&P medicines for duty payment.2. Assessment of physician samples for free distribution.3. Refund claims based on Supreme Court judgment.4. Application of Central Excise Act for valuation.5. Justification of refunds and unjust enrichment.6. Imposition of interest amount and penalty.Analysis:Issue 1: Valuation of P&P medicines for duty paymentThe appeals involved the issue of the valuation of P&P medicines for duty payment. The department contended that physician samples should be assessed under Rule 4 of the Central Excise Valuation Rules, 2000, based on the MRP of the goods. The appellants paid duty based on this view but later filed refund claims after a Supreme Court decision. The original authority and Commissioner (Appeals) upheld the duty payment, leading the matter to the Tribunal.Issue 2: Assessment of physician samples for free distributionThe dispute also centered around the assessment of physician samples for free distribution without MRP/RSP affixed on the medicines. The department's view was based on a circular that the value should be determined under Rule 4 of the Valuation Rules. The appellants sought refunds based on subsequent judgments, including the Supreme Court decision in CCE, SURAT Vs. SUN PHARMACEUTICALS INDS. LTD., which held that valuation should be based on the contract price between the parties.Issue 3: Refund claims based on Supreme Court judgmentThe Ld. Consultant argued that the issue was settled by various judgments, including the one by the Supreme Court, making the refunds eligible. The Tribunal agreed, citing the SUN PHARMACEUTICALS INDS. LTD. case and subsequent decisions. The matter was remanded back to the original authority to examine the refund's impact on unjust enrichment, ensuring the appellants have the opportunity to present additional evidence.Issue 4: Application of Central Excise Act for valuationThe Tribunal found the consultant's reliance on the SUN PHARMACEUTICALS INDS. LTD. case to be correct, as it aligned with the facts of the present appeal. The Tribunal noted that the case law's ratio had been followed in subsequent judgments, indicating that the refunds were sanctionable under Section 4(1)(a) of the Central Excise Act, 1944.Issue 5: Justification of refunds and unjust enrichmentThe Tribunal determined that the refunds were sanctionable based on the applicable case law. However, to address the issue of unjust enrichment, the matter was remanded to the original authority. The Tribunal emphasized providing the appellants with ample opportunity to present their case and any additional documents during the proceedings.Issue 6: Imposition of interest amount and penaltyIn a parallel appeal, the original authority confirmed an interest amount and imposed a penalty. However, as the primary issue in favor of the appellants was decided in the other appeals, this appeal was allowed by setting aside the upheld demand of interest and penalty.In conclusion, all three appeals were disposed of based on the above analysis, with the matter remanded for further consideration on the issue of unjust enrichment.