2005 (9) TMI 397 - AT - Central Excise

Summary

Issues Involved:
1. Duty demands on free supply of receivers during 1989-92.
2. Duty demands on notional interest on advances taken from buyers.
3. Demand on installation and commissioning charges.
4. Demand on advertisement costs incurred by dealers.
5. Contesting denial of Modvat credit.

Analysis:

1. Duty Demands on Free Supply of Receivers:
The appeal contested duty demands of over Rs. 8 lakhs concerning free supply of receivers during 1989-92. The appellant argued that the free supply was transparently documented in price lists, gate passes, and invoices, indicating no intent to evade duty payment. The department lacked evidence of clandestine sales, and all supplies were duly recorded. Consequently, the demand was deemed time-barred due to absence of suppression of facts, rendering the proviso to Section 11A inapplicable.

2. Duty Demands on Notional Interest on Advances:
Another demand of around Rs. 6 lakhs pertained to notional interest on advances taken from buyers. The appellant contended that the revenue incorrectly attributed advances to domestic market sales, while most were for exports. The demand lacked scrutiny on whether advances influenced sale prices, as required by a circular. The judgment cited favored the appellant's stance, emphasizing the revenue's burden to prove any impact of interest-free advances on pricing. Hence, the demand was deemed unsustainable both on merit and limitation grounds.

3. Demand on Installation and Commissioning Charges:
A significant demand of about Rs. 12 lakhs was raised concerning installation and commissioning charges, exceeding the initial confirmed amount related to profit from installation work. The appellant argued that such charges should not be part of assessable value as they were unrelated to manufacturing. The judgment supported this view, establishing that separately collected service charges do not contribute to assessable value, rendering the demand unsustainable.

4. Demand on Advertisement Costs Incurred by Dealers:
A demand of approximately Rs. 16,000 was based on dealers' advertisement costs, alleged to increase assessable value. The appellant opposed this claim, highlighting that dealer advertisement costs should not be included in assessable value as dealers also benefitted. Citing a relevant Apex Court judgment, the demand was found unjustified, aligning with established legal principles.

5. Contesting Denial of Modvat Credit:
The appellant did not contest the denial of Modvat credit amounting to Rs. 1,925.50, leading to its confirmation. However, the remaining duty demands and penalties were set aside, granting relief to the appellant. The judgment concluded by ordering the appeal in favor of the appellant, with entitlement to consequential relief if applicable.