Factory packaged medicines exported to Nepal must use transaction value under Section 4, not MRP-based Section 4A valuation method

CESTAT Kolkata ruled on valuation method for factory packaged medicines under Central Excise Act. Appellant transferred goods to Patna depot for Nepal export using MRP-based valuation under Section 4A, but Revenue demanded differential duty using transaction value under Section 4. Tribunal held MRP valuation applies only to domestic sales under SWM Act, not exports to Nepal, following Gillette India precedent. Differential duty demand upheld with interest. However, penalty under Section 11AC set aside as no mens rea established since appellant voluntarily paid differential duty after accepting liability, showing no intent to evade duty.

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Issues:
- Applicability of MRP based valuation under Section 4A for goods sold outside the country
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944

Analysis:

Applicability of MRP based valuation under Section 4A for goods sold outside the country:
The case involved M/s. Albert David Limited, engaged in manufacturing medicaments, who had sold packaged medicines to Nepal buyers from their Patna depot. The Department contended that MRP based valuation under Section 4A was only applicable for domestic sales, not for goods sold outside the country. The Department demanded differential duty based on transaction value under Section 4 of the Central Excise Act. The Tribunal observed that MRP based valuation is not applicable for goods sold outside the country, as evidenced in the case of Gillette India Ltd. v. Commissioner of Central Excise, Jaipur. The appellant accepted the valuation under Section 4 and paid the differential duty, leading the Tribunal to uphold the demand of duty confirmed in the impugned order along with interest.

Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The appellant contested the penalty imposed under Section 11AC, arguing they had no intention to evade duty. They cleared goods to their depot at Patna using MRP based valuation, unaware that some goods would be sold to Nepal buyers later. The Tribunal found merit in the appellant's submission, noting the absence of intent to evade duty. As the appellant accepted their liability and paid the differential duty after receiving orders from Nepal buyers, the Tribunal held that no mens rea or intention to evade payment of duty existed. Consequently, the penalty under Section 11AC was deemed unsustainable, and it was set aside in the judgment.

In conclusion, the Tribunal upheld the demand of duty with interest but set aside the penalty imposed under Section 11AC of the Central Excise Act, 1944. The appeal was disposed of with this decision.

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