1998 (12) TMI 564 - AT - Central Excise

Issues Involved:
1. Claim of Exemption under Notification No. 171/67.
2. Invocation of Larger Period of Limitation.
3. Determination of 'Value' under Section 4 of the Central Excise Act, 1944.
4. Applicability of Retrospective Amendment to Section 4 by Finance Act, 1982.
5. Recalculation of Duty Liability and Consideration of Modvat Credit.

Detailed Analysis:

1. Claim of Exemption under Notification No. 171/67:
The appellants, manufacturers of footwear, claimed exemption under Notification 171/67, which initially exempted footwear valued up to Rs. 5/- per pair and was later amended to higher values. The department issued a show-cause notice alleging wrongful exemption claims, resulting in a loss of Rs. 13,81,134.88 in Central Excise Duty. The lower appellate authority confined the duty liability to the normal limitation period of six months, rejecting the invocation of the longer five-year limitation period.

2. Invocation of Larger Period of Limitation:
The department invoked the larger period of limitation of five years, alleging wilful misstatement or suppression of facts by the appellants. However, the lower appellate authority did not find sufficient grounds for such allegations and limited the duty liability to the normal six-month period preceding the show-cause notice.

3. Determination of 'Value' under Section 4 of the Central Excise Act, 1944:
The core controversy was the determination of 'value' for exemption purposes. The revenue contended that the value under the exemption notification should be the wholesale price, inclusive of duty, as sold to wholesalers. The appellants argued that the 'value' should be determined under Section 4, which allows deduction of the duty element from the wholesale price. The Patna High Court and the Supreme Court, in earlier judgments, supported the appellants' view, stating that the assessable value should be determined first, and then the exemption should be considered.

4. Applicability of Retrospective Amendment to Section 4 by Finance Act, 1982:
The retrospective amendment to Section 4 by the Finance Act, 1982, introduced an explanation affecting the computation of 'value' for exemption purposes. The Assistant Collector and the Collector (Appeals) applied this explanation to deny the exemption, arguing that the duty element should not be deducted if no duty is actually paid. The appellants contended that the amendment's intent was to address a different issue and should not affect their case, which was previously decided in their favor by the Supreme Court.

5. Recalculation of Duty Liability and Consideration of Modvat Credit:
The appellants argued that the wholesale prices collected from customers should be treated as cum-duty prices, and the duty element should be deducted to determine the assessable value. They also sought consideration of Modvat credit for inputs used in manufacturing the footwear. The Tribunal agreed with the appellants that the wholesale prices should be treated as cum-duty prices, and the duty element should be deducted to determine the assessable value. The Tribunal directed the lower authorities to reconsider the quantum of duty, taking into account the appellants' submissions regarding Modvat credit and other relevant factors.

Conclusion:
The Tribunal dismissed the appellants' plea that no duty liability exists based on the exemption notification but directed the lower authorities to reconsider the quantum of duty in light of the appellants' submissions regarding cum-duty prices and Modvat credit. The appeal was disposed of with directions for re-adjudication by the concerned Assistant Commissioner of Central Excise.

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