Place of removal governs excise valuation, while pre-notice duty payment defeats penalty under central excise law.

Under the amended Section 4 of the Central Excise Act, valuation was linked to the place where the goods were ordinarily sold after removal from the factory, so the prices prevailing at the Pune, Delhi and Calcutta depots were correctly adopted because those depots were the relevant places of removal; the duty demand was sustained. Penalties under Section 11AC and Rule 173Q were not sustainable because the duty had been paid before issuance of the show cause notice, and the penalties were deleted. The assessee therefore obtained partial relief only on the penalty issue.

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Issues: (i) Whether the assessable value of the goods cleared from the factory was to be determined with reference to the Chennai depot price or the prices prevailing at the Pune, Delhi and Calcutta depots under the amended valuation provisions; (ii) Whether the penalties under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules were sustainable when the duty had been paid before issuance of the show cause notice.

Issue (i): Whether the assessable value of the goods cleared from the factory was to be determined with reference to the Chennai depot price or the prices prevailing at the Pune, Delhi and Calcutta depots under the amended valuation provisions.

Analysis: The amended Section 4 treated a depot or other premises from where excisable goods are sold after clearance from the factory as a place of removal. Proviso (ia) to Section 4(1)(a) applied where goods were ordinarily sold at different places of removal, in which event the relevant price at each such place became the normal price for that place. On the facts, the goods were ultimately sold from the Pune, Delhi and Calcutta depots, while the Chennai depot functioned only partly as an outlet for sale and partly as a stock-transfer point. The pricing adopted by the department therefore reflected the place where the goods were actually and ordinarily sold, and the cited decisions were distinguished on that basis.

Conclusion: The valuation adopted by the Commissioner was upheld and the demand of duty was sustained.

Issue (ii): Whether the penalties under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules were sustainable when the duty had been paid before issuance of the show cause notice.

Analysis: The entire duty amount, and more than that, had been paid before the show cause notice was issued. In such circumstances, the settled view applied that penalty under Section 11AC and Rule 173Q was not warranted, and the Larger Bench view in the cited Tribunal decision supported deletion of the penalties.

Conclusion: The penalties were set aside and were held unsustainable.

Final Conclusion: The duty demand was maintained, but the penalties were deleted, resulting in a partial relief to the assessee.

Ratio Decidendi: Under the amended Section 4, the relevant place of removal for valuation is the place from which the goods are ordinarily sold, and penalty under Section 11AC or Rule 173Q is not sustainable where the duty has been paid before the show cause notice.

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