2010 (12) TMI 15 - SUPREME COURT

Valuation - Sale through related parties - normal value - penalty for short payment - Section 4 and 11AC - of CEA, 1944 and The Revenue contends that an obvious corollary to this is that the freight charges so arising between the factory gate of the assessee and the place of removal at the depot of the related person should constitute the value of the goods for the purposes of computation of excise duty. It further contends that since, the `place of removal' is not the assessee's factory gate but rather the depot of the related person, the price is known, only at the price at which goods are sold to whole sellers by the related person. - Held that: - contention of the respondent (manufacturer) that it is justified in claiming exclusion of freight charges arising between the factory gate of the respondent to the depot of the related person, cannot be sustained - order of tribunal reversed - decided in favor of revenue.

Regarding penalty u/s 11AC - It is well settled that when the statutes create an offence and an ingredient of the offence is a deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires `mens rea' as a necessary constituent of such an offence. But when factually no fraud or suppression or mis- statement is alleged by the revenue against the respondent in the show cause notice the imposition of penalty under Section 11 AC is wholly impermissible.