2001 (4) TMI 765 - AT - Central Excise

Summary

Issues:
Assessment of duty on the basis of assessable value including freight and insurance charges up to buyer's premises, imposition of penalty under Rule 173Q and Section 11AC, application of extended period of limitation, property transfer and place of removal, duty demand sustainability, limitation plea rejection, mandatory penalty under Section 11AC, discretion to impose lesser penalty.

Assessment of Duty and Imposition of Penalty:
The Central Excise officers visited the manufacturing premises and found agreements for supply of goods with various Oil Companies. The goods were to be dispatched preferably by rail "freight prepaid," and if dispatched by road, the Oil Companies would pay actual freight charges. Insurance policies indicated that goods were insured by the assessee until reaching the buyer's premises, making the value of goods at the place of sale the basis for duty assessment. Freight and insurance charges were deemed includible in the assessable value up to the buyer's premises as the place of removal, leading to a duty demand notice. The Assistant Commissioner confirmed the duty demand with interest and imposed a penalty equal to the duty amount under Section 11AC and Rule 173Q. The Commissioner (Appeals) upheld the demand but reduced the penalty. The Tribunal upheld the duty demand and penalty, citing similar cases and holding the duty demand sustainable.

Extended Period of Limitation and Property Transfer:
The assessee argued that the demand was partly barred by limitation as no material facts were concealed to evade duty payment. However, the Tribunal found no merit in this submission, noting that the assessee did not disclose that goods would be sold only at the buyer's destination and did not provide insurance documents to the Department. Therefore, the extended period of limitation under the proviso to Section 11A was upheld, and the duty demand and penalty were deemed sustainable based on the property transfer and place of removal principles.

Mandatory Penalty and Discretion:
Regarding the appeal of the Revenue, the Tribunal rejected the contention that Section 11AC imposes a mandatory penalty, clarifying that the limit set is maximum, and the authority has discretion to impose a lesser penalty. This interpretation aligned with previous decisions, leading to the rejection of the Revenue's appeal.

In conclusion, the Tribunal upheld the duty demand and penalty, rejected the limitation plea, and affirmed the discretionary nature of penalties under Section 11AC. The judgment emphasized the importance of disclosing material facts, property transfer considerations, and the assessment of duty based on the value at the buyer's premises as the place of removal.