2002 (2) TMI 1172 - AT - Central Excise

Issues Involved:
1. Inclusion of notional interest on advances in the assessable value.
2. Alleged suppression of facts by the assessee.
3. Invocation of the extended period for demand of duty.
4. Imposition of penalties under Section 11AC of Central Excise Act, 1944 and Rule 173Q of Central Excise Rules, 1944.

Detailed Analysis:

1. Inclusion of Notional Interest on Advances in the Assessable Value:

The appellants manufacture HDPE/PP Tape, HDPE/PP Fabric laminated/unlaminated, and HDPE/PP Woven Sacks/Bags. The Central Excise party observed that the appellants received advances against the supply of these goods from their buyers and adjusted these advances at the time of delivery. The show cause notice alleged that the notional interest earned on such advances should be included in the assessable value of the goods as per Rule 5 of the Central Excise (Valuation) Rules, 1975, and Section 4 of the Central Excise Act, 1944. The Commissioner of Central Excise, Jaipur, held that the loans taken from the buyer affected the sale price, and thus, the interest amount should be included in the assessable value.

2. Alleged Suppression of Facts by the Assessee:

The department alleged that the assessee did not submit details of advances/deposits received from their customers until specifically asked, indicating suppression of facts to evade Central Excise duty. The Commissioner upheld this view, stating that there was suppression on the part of the assessee, justifying the inclusion of the interest amount in the assessable value.

3. Invocation of the Extended Period for Demand of Duty:

The Commissioner invoked the extended period of five years for demanding duty, citing suppression of facts by the assessee. The assessee argued against this, stating that they had filed a declaration of their marketing pattern, including information about advances/deposits, with their Range Office.

4. Imposition of Penalties:

The Commissioner imposed a penalty equal to the demanded duty amount under Section 11AC and an additional penalty of Rs. 10,000/- under Rule 173Q, along with the recovery of interest on the confirmed duty amount as per Section 11AB.

Judgment:

The Tribunal considered the submissions and evidence provided by both parties. The appellants argued that the advances received were part of a marketing arrangement and did not influence the sale price. They provided comparative data showing that the prices charged to M/s. Oswal Chemicals & Fertilizers Ltd. were comparable to those charged to other buyers like M/s. IFFCO Ltd. and other manufacturers.

The Tribunal found that the Revenue had not established that the advances/loans resulted in a depression of the sale price. The cited case laws supported the view that notional interest on interest-free deposits should not be added to the assessable value unless it influenced the sale price. The Tribunal noted that the adjudicating authority failed to examine the comparative data in detail and did not quantify the money value of additional consideration under Rule 5.

The Tribunal concluded that the appellants had successfully demonstrated that the prices charged were comparable and not influenced by the advances. Consequently, the Tribunal set aside the impugned order and allowed the appeal, without examining the plea of time bar due to the decision on merits.

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