2006 (7) TMI 426 - AT - Central Excise

Summary

Issues Involved:
1. Determination of assessable value under Section 4(1) of the Central Excise Act, 1944.
2. Validity of ex-factory prices as the normal price.
3. Justification for duty demand and penalty imposed by the Commissioner.
4. Denial of cross-examination of dealers.

Detailed Analysis:

1. Determination of Assessable Value under Section 4(1) of the Central Excise Act, 1944:
The central issue revolves around whether the ex-factory prices can be considered the assessable value for the goods manufactured by the appellant. The Tribunal referred to several precedents, including the case of Indian Oxygen Ltd., which established that if ex-factory prices are ascertainable and genuine, they should be used as the assessable value. The Tribunal cited multiple cases to support this principle, including Bharati Telecom Ltd., Bio Foods (P) Ltd., and Southern Bottlers Pvt. Ltd., among others.

2. Validity of Ex-Factory Prices as the Normal Price:
The Tribunal examined whether the ex-factory prices were genuine and reflected the normal price. The Commissioner had found that the ex-factory prices had remained unchanged from October 1991 to July 1994, while depot prices had increased multiple times. This discrepancy raised doubts about the genuineness of the ex-factory prices. The Tribunal noted that the appellant did not provide any material to explain why the ex-factory prices remained static while depot prices increased, which contradicted commercial realities. Consequently, the Tribunal upheld the Commissioner's finding that the ex-factory prices were contrived and not normal.

3. Justification for Duty Demand and Penalty Imposed by the Commissioner:
The Commissioner had confirmed a duty demand of Rs. 76,17,656/- and imposed a penalty of Rs. 8 lakhs on the appellant. The Tribunal found no justification to upset the Commissioner's order regarding the duty demand, as the grounds of appeal did not convincingly challenge the Commissioner's valuation of the assessable values. However, the Tribunal set aside the penalty, noting that the appellant had a favorable order for an earlier period regarding their ex-factory prices.

4. Denial of Cross-Examination of Dealers:
The appellant argued that the denial of cross-examination of various dealers was unjustified. The Tribunal dismissed this plea, stating that cross-examination would not have provided any material to explain why the ex-factory prices remained static. Since the ex-factory prices were found to be contrived and not normal, the lack of cross-examination did not affect the outcome.

Conclusion:
The Tribunal confirmed the duty demand as determined by the Commissioner but set aside the penalty imposed. The appeal was disposed of accordingly, with the duty demands being upheld and the penalty being removed. The Tribunal emphasized that the ex-factory prices were not normal and therefore could not be used to determine the assessable value under Section 4(1) of the Central Excise Act, 1944.