2002 (7) TMI 658 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposition based on under-valuation of compressors.
2. Appointment of Cost Accountant for determination of compressor value.
3. Challenge to Cost Accountant's report and imposition of penalty.
4. Correctness of fair selling price calculation by the Cost Accountant.
5. Legal validity of adding overheads and profit to compressor price.
6. Application of the law laid down in the case of M/s. Srichakra Tyres.
7. Modification of the Commissioner's order and recalculation of duty demand.

Analysis:
1. The appeal was filed against an order confirming duty demand and penalty for under-valuation of compressors. The appellants were engaged in manufacturing compressors and related items, liable to pay duty only on compressors, condensers, and cooling coils. The Commissioner confirmed duty demand of Rs. 22,71,697 and imposed penalties based on alleged under-valuation.

2. A Cost Accountant was appointed to determine the cost of compressors. The Commissioner relied on the Cost Accountant's report for confirming duty demand. The Tribunal set aside the Commissioner's order, leading to a fresh decision. The Commissioner reproduced the earlier order post remand.

3. The appellants challenged the Cost Accountant's report, arguing against loading accessory prices onto compressor prices for duty calculation. They claimed bias and requested cross-examination, which was denied. The appellants contended that the report should not be the sole basis for confirming duty demand.

4. The Cost Accountant calculated the fair selling price of compressors and accessories based on raw material and manufacturing costs. The correctness of this calculation was not disputed by the appellants. However, the method of adding overheads and profit to the compressor price was contested.

5. The Cost Accountant's addition of overheads and profit to the compressor price was deemed legally incorrect. The fair selling price, as calculated without additional accessory prices, was considered the assessable value for duty calculation. The appellants were directed to pay duty based on this revised calculation.

6. The argument invoking the law laid down in the case of M/s. Srichakra Tyres, regarding the inclusion of duty in wholesale prices, was rejected due to the appellants' under-valuation practices. The benefit of this law was not extended in this case.

7. Consequently, the Commissioner's order was modified, and the matter was remanded for recalculation of duty demand based on the fair selling price of compressors. The appellants were instructed to pay any balance duty owed after adjustment for duty already paid.

In conclusion, the appeal was disposed of with the decision to recalculate duty demand based on the fair selling price of compressors, excluding additional accessory prices, as determined by the Cost Accountant.