2002 (11) TMI 378 - AT - Central Excise

Summary

Issues involved: Central Excise valuation of foot wear, undervaluation leading to short levy of duty, duty demand for the extended period, challenge on merits and limitation.

Central Excise Valuation of Footwear:
The judgment revolves around the central issue of the valuation of foot wear manufactured by Liberty Shoes Group in their factories. The appellants were clearing the foot wear after paying duty based on ex-factory sale price. The impugned order alleged undervaluation, resulting in short levy of Central Excise duty from 1991-1996. The order demanded the duties short levied, interest, and penalties due to suppression of facts. The appellants contested this, arguing that the sale prices to showrooms and distributors were the same, meeting the normal sale price requirements under the Central Excise Act. They claimed that the demand resulted from an erroneous application of central excise valuation provisions.

Merits of the Case:
The appellants contended that the addition of 15% to the ex-factory price was unjustified, as it equated to the distributors' sale price, which they argued was not warranted. They emphasized that small deposits made by distributors did not affect the ex-factory sale price, as evidenced by invoices and trade practices. The appellants also highlighted previous orders by Central Excise authorities affirming the valuation based on ex-factory price, contradicting the impugned order's stance.

Legal Position and Precedents:
The appellants argued that the impugned order's valuation findings contradicted settled legal principles, citing the Apex Court's decision in VST Industries Limited. They maintained that the addition of notional interest due to deposits lowering sale prices was unwarranted, especially when prices to deposit-making and non-deposit-making distributors were the same. They stressed that the assessable value should align with the manufacturer's price, not the distributors' price.

Limitation and Trade Practice:
Regarding the time limit, the appellants highlighted the consistency in their trade practices across the relevant periods, emphasizing that differing opinions on assessable value did not indicate contumacious conduct. They argued that the conflicting findings between the impugned order and previous jurisdictional orders indicated a mere difference in opinion, not fraud or misrepresentation.

Conclusion:
Ultimately, the judgment found the impugned order unsustainable in law or fact, setting it aside and allowing the appeals in favor of the appellants. The decision emphasized that the deposits did not influence pricing, and the valuation should be based on the manufacturer's price. It also underscored the importance of consistency in trade practices and the absence of fraudulent intent in the appellants' actions.