2002 (10) TMI 460 - AT - Central Excise

Summary

Issues:
1. Whether demands and penalties against the appellants are sustainable after the rescission of Notification 36/95.
2. Interpretation of Section 3 and Section 4 of the Central Excise Act, 1944 regarding tariff values and valuation of goods.

Analysis:

Issue 1:
The appellants were engaged in the manufacture of texturised polyester filament yarn under Chapter 54 of the Schedule to the Central Excise Tariff Act, 1985. Initially, they cleared the goods at Rs. 98/- per kg under Notification 36/95. However, this notification was rescinded by Notification 103/95, resulting in the removal of the fixed tariff value. Subsequently, show cause notices were issued for the recovery of short levy and penalties as the goods were sold at a price lower than Rs. 98/- per kg. The appellants challenged these orders, arguing that they were free to sell goods at a price lower than the earlier fixed tariff value after the rescission of Notification 36/95. The Tribunal agreed, holding that the demands and penalties were not sustainable after the removal of the fixed rate, and thus set aside the impugned orders and allowed the appeals.

Issue 2:
Section 3 of the Central Excise Act, 1944 prescribes the levy and collection of duties, allowing the Central Government to fix tariff values for articles chargeable with duty at ad valorem rates. When tariff values are fixed, the provisions of Section 4, which govern the valuation of goods for duty calculation, do not apply. The Tribunal clarified that after the rescission of tariff values, it is the responsibility of jurisdictional officers to determine whether the price charged by the assessee should be the basis for calculation under Section 4. The Tribunal emphasized that the belief in the show cause notice that the assessee was required to follow the fixed tariff values even after their removal was unfounded and contrary to law. Therefore, the Tribunal held that the pricing of goods by the assessee should be considered for duty calculation post the rescission of tariff values, and not the earlier fixed rates.

In conclusion, the Tribunal found in favor of the appellants, ruling that they were not bound by the fixed tariff values after the rescission of Notification 36/95. The Tribunal emphasized the importance of correctly applying the provisions of Section 3 and Section 4 of the Central Excise Act, 1944 in determining the valuation of goods for duty calculation purposes.