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2014 (9) TMI 29 - HC - Central ExciseRecovery of excessive refund / rebate of excise duty granted earlier - export of pharmaceutical products - allegation of over-valuation of goods - Held that:- it is understood that the entire process of launching a new product involves huge expenditure. These hidden costs are also have to be considered for arriving at the sale price of such innovative product. Further, Dr. Reddy's vide their letter dated 17.08.2011 have undertook to submit the Bank Realisation Certificate on receipt of export proceeds. In view of these facts, the declared value is acceptable. The assessee is therefore, eligible for a rebate-under Rule 18 of the Central Excise Rules, 2002 read with Notification No.19/2004- C E (N T) dated 06.09.2004, as amended. However, as the duty is calculated and paid on the value declared in ARE.1 for arriving at transaction value the actual freight amount, Insurance, commission and local freight, if any paid are to be deducted from CIF Value. Therefore, basing on the information furnished, the duty has been re-worked put and arrived at the rebate to be given in cash. The revisionary authority discarded these prices on the ground that the price charged by the inventor cannot be a basis for comparison and that the substantially lower price charged by Sun Pharmaceuticals in India is a better comparison. It was further held that the substantial mark-up in the transaction between Dr. Reddy’s and its Jersey subsidiary implied some distortion in the transaction value. Thus, the best judgment method was used with a cost plus 10% mark up as the correct value. This reasoning is unacceptable. Under Rule 18- which contemplates return of the excise duty paid in cases of exported goods,- the market price must necessarily refer to the market where the goods are sold, - in this case, the United States market. The goods in question are neither meant for, nor did they ever enter, the Indian market. In the present case, approximately ₹ 411 crores was received in India in foreign exchange from the sale of these drugs. On this basis, excise duty was paid and later recovered. At no point did Dr. Reddy’s receive a net benefit from the transaction. If the Revenue’s argument is to be accepted, a higher price is accepted by it at the time of payment of excise duty on the basis of the price in the foreign market, but a different (and lower) price is mandated on revaluation for the purposes of refunding that very amount. Rule 18 ensures any duty paid is returned, and that excise duty is not added to the cost of exports who are selling abroad. The revenue effect in such cases is to be nil. Thus, it is unfortunate that in the present case it has resulted in two orders of revision under Section 35E(2), the two appellate orders and the common revisionary order, which have led to an appeal before the CESTAT and the present writ petition. - Decided in favor of assessee.
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