2004 (6) TMI 435 - AT - Central Excise

Issues Involved:
1. Differential duty demand due to incorrect valuation.
2. Inclusion of sound delivery charges in the assessable value.
3. Inclusion of charges for monogram printing, edge grinding, etc., in the assessable value.
4. Allegation of clandestine removal of goods.
5. Liability for penalties on the company and its officers.

Issue-wise Detailed Analysis:

1. Differential Duty Demand Due to Incorrect Valuation:
The appellant, a manufacturer of glass products, was charged with evading duty amounting to Rs. 49 lakhs. The duty demand was based on incorrect valuation for supplies to Indian Railways under DGS&D rate contracts and allegations of clandestine manufacture and removal of goods. The valuation dispute arose from two grounds: the inclusion of sound delivery charges and charges for monogram printing, edge grinding, etc., in the assessable value.

2. Inclusion of Sound Delivery Charges in the Assessable Value:
The duty demand related to sound delivery charges amounted to Rs. 18.3 lakhs. The appellant argued that sales were made on an ex-factory basis, with sound delivery charges being post-removal costs like transport. The goods were inspected and approved at the factory before removal. The appellant cited precedents such as *Associated Strips Ltd. v. C.C.E.* and *Escorts JCB Ltd. v. C.C.E.* to support the claim that post-clearance expenditure should not form part of the assessable value. The Tribunal agreed, stating that the duty liability is on the ex-factory sale price, not including post-removal expenses like freight.

3. Inclusion of Charges for Monogram Printing, Edge Grinding, etc., in the Assessable Value:
The demand of Rs. 8.7 lakhs for these charges was contested as time-barred. The appellant argued that the valuation method was known to the Central Excise authorities, and there was no suppression of facts. Previous adjudications had addressed the issue, and the delay in raising the demand was attributed to the Department's omission. The Tribunal held that the demand was barred by limitation, as the facts were known to the authorities, and the extended period for issuing a show cause notice under Section 11A was not applicable.

4. Allegation of Clandestine Removal of Goods:
The duty demand of over Rs. 22 lakhs was based on discrepancies between quantities cleared under Central Excise invoices and commercial invoices. The appellant explained the differences as notional, due to varying methods of calculating the surface area of irregularly shaped goods like oval mirrors. The Tribunal found this explanation plausible, noting that the difference was not material since the duty was ad valorem.

However, a duty demand of Rs. 5,87,595/- was admitted by the appellant for mirrors cleared as toughened safety glass at a lower value. The Tribunal deemed this a clear case of clandestine removal, involving misdescription and undervaluation. The demand was upheld under the proviso to Section 11A.

The appellant's explanation for Rs. 6,99,800/- worth of goods allegedly bought from other dealers and resupplied to railways was rejected. The Tribunal found inconsistencies in the appellant's records and explanations, including a lack of correlation between purchases and sales, and discrepancies in the descriptions of purchased and sold goods. The Tribunal confirmed the duty demand, emphasizing that positive proof of clandestine manufacture and removal is not required with mathematical precision in civil tax proceedings.

5. Liability for Penalties on the Company and Its Officers:
The Tribunal acknowledged that the evasion of duty involved wilful clandestine operations, justifying a penalty on the manufacturer. However, it reduced the penalty to Rs. 10 lakhs in view of the revised duty amount. The Tribunal found no justification for individual penalties on the officers, as these were not proposed in the show cause notice. Appeals by the officers were allowed.

Conclusion:
The appeal by the manufacturer was partly allowed, reducing the duty demand to Rs. 12,87,395/- and the penalty to Rs. 10 lakhs, with interest payable on the revised duty amount. Appeals by the penalized officers were allowed.

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