2003 (12) TMI 339 - AT - Central Excise

Summary

Issues:
1. Interpretation of an agreement between two parties regarding the sale of annealed powder.
2. Application of extended period of limitation based on alleged suppression of facts.
3. Justification of reduced price to the largest buyer and its relation to the agreement terms.
4. Consideration of the pricing pattern and availability of extended period of limitation.

Issue 1 - Interpretation of Agreement:
The case involved an agreement where the appellant sold annealed powder to another party based on a formula including cost of production, profit margin, and a commitment by the buyer not to manufacture the same product for 10 years. The agreement specified pricing, minimum purchase quantity, and the duration of the arrangement. The appellant contended that the reduced price to the buyer was due to it being the largest buyer, while the department argued that the reduced price was compensation for the buyer's commitment not to produce the goods.

Issue 2 - Extended Period of Limitation:
The department issued a notice proposing an increase in price for goods sold to the buyer and demanded duty based on the alleged suppression of the agreement terms. The department invoked the extended period of limitation, claiming that the appellant had withheld crucial information from them. The appellant challenged the availability of the extended period of limitation, arguing that the agreement terms were disclosed to the department.

Issue 3 - Justification of Reduced Price:
The Tribunal analyzed the justification for the reduced price given to the largest buyer. It considered the buyer's significant share of purchases, the commitment to minimum quantities, and the absence of uncertainty in future purchases. The Tribunal found that the reduced price was reasonable considering these factors and was not solely linked to the buyer's commitment not to produce the goods for 10 years.

Issue 4 - Pricing Pattern and Limitation Period:
The appellant argued that the agreement terms, including the reduced price, were disclosed to the department in a letter. The Commissioner did not address this submission adequately and imposed a penalty. The Tribunal held that as the agreement terms were made available to the department, there was no suppression of pricing information, and the extended period of limitation should not apply. The appeals were allowed, the impugned order was set aside, and consequential relief was granted.