2005 (10) TMI 367 - AT - Central Excise

Demand - Limitation - Larger period of limitation - Invocation of - Penalty - Undervaluation

Summary

Issues:
- Show cause notice barred by limitation
- Inclusion of cost of inlay card covers in assessable value
- Penalties imposed on different parties

Show cause notice barred by limitation:
The case involved a show cause notice issued to a company regarding the undervaluation of recorded audio cassettes. The Commissioner of Central Excise (Appeals) set aside the notice, citing that a previous notice on the same issue was already pending adjudication. The Commissioner argued that the Department cannot issue another notice on the same issue invoking a larger period of limitation. The Tribunal agreed that the notice was barred by limitation, as the seizure of goods in December 1997 did not warrant a larger period of limitation. However, the Tribunal noted that the notice was not entirely barred by limitation as it covered the month of December 1997 within the normal period.

Inclusion of cost of inlay card covers in assessable value:
The main issue revolved around whether the cost of inlay card covers supplied by a customer should be included in the assessable value of the final product. The Commissioner relied on previous judgments to support the company's position that the cost of such covers need not be included. However, the Tribunal disagreed and referenced a specific case where it was held that such items should be included in the assessable value. The Tribunal rejected the argument that the recorded cassettes could be marketed without the inlay card covers, as evidenced by the seized goods having these covers. Therefore, the Tribunal upheld that the cost of inlay card covers should be included in the assessable value.

Penalties imposed on different parties:
Penalties were imposed on various parties involved in the supply chain, including the manufacturer of inlay card covers and the company supplying them. The Tribunal rejected the penalties imposed on the manufacturer of the covers, as they were not connected to the undervaluation of goods. Additionally, the penalties on the company directly benefiting from the arrangement were set aside, as the responsibility to declare the correct value of goods lay with the manufacturer. However, penalties on the company undervaluing the goods were deemed imposable, as they had contravened Central Excise Rules by not declaring the correct value of the goods.

In conclusion, the Tribunal allowed the Revenue's appeals in part, remanding the case for re-determination of duty and penalties, while rejecting appeals against setting aside penalties on certain parties.