2003 (3) TMI 373 - AT - Central Excise

Summary

Issues:
1. Assessable value for Central Excise duty purposes based on related persons.
2. Duty demand and penalties challenged on merits and limitation grounds.
3. Allegation of suppression of facts to evade duty payment.
4. Previous proceedings and awareness of revenue authorities.
5. Commercial relationship between manufacturing and marketing companies.
6. Re-computation of duty demand based on sale price deductions.

Analysis:
1. The appellants, manufacturers of fans, sold their entire production to a marketing company, which then sold the fans to dealers. The impugned order held that the manufacturing and marketing companies were related persons, requiring the assessable value for Central Excise duty to be the sale price of the marketing company. The appellants paid duty based on the sale price to the marketing company. The order reassessed the goods, demanding differential duty from the manufacturing companies and imposing penalties equivalent to the duty evaded.

2. The appeals contested the duty demand and penalties on both merit and limitation grounds. The contention was that the Show Cause Notice issued beyond the normal period provided in Section 11A of the Central Excise Act was time-barred. The proviso allowing a demand for five years was argued not to be applicable due to the absence of wilful suppression or misstatement of facts.

3. During the hearing, it was highlighted that revenue authorities were aware of the marketing arrangement between the appellants as early as 1994. Previous proceedings and orders indicated that the sale price of the manufacturing companies to the marketing company needed adjustments, which were later set aside by the Tribunal. The allegation of suppression of facts for duty evasion was deemed not maintainable due to the authorities' prior knowledge.

4. The learned Counsel emphasized the commercial nature of the relationship between the manufacturing and marketing companies, showcasing the minimal profit margins after deductions. While not pressing the merits issue due to time limitations, they requested due deductions for freight, taxes, cash discount, and transit insurance from the sale price of the marketing company for the short period within the normal time limit.

5. The Tribunal noted that revenue authorities were aware of the marketing pattern of the appellants since 1994. The Commissioner's order was criticized for re-opening proceedings based on isolated examination of facts, which was known to the authorities. The demand for the extended period was deemed time-barred, and the demand within the normal time limit required re-computation after deducting costs from the sale price of the marketing company.

6. Consequently, the appeals were decided in favor of the appellants:
1. Duty demands beyond the normal period were set aside.
2. Penalties under the order were quashed due to setting aside duty demands beyond the normal period.
3. The Commissioner was instructed to re-compute duty demands within the normal period, with the appellants to comply based on the sale price deductions as specified.