2006 (10) TMI 313 - AT - Central Excise

Issues Involved:
1. Inclusion of equalized freight charges in the assessable value.
2. Inclusion of labour and painting charges in the assessable value.
3. Invocation of the extended period for demand.
4. Financial hardship and pre-deposit requirement under Section 35F.
5. Imposition of penalty under Rule 173Q read with Section 11AC.

Detailed Analysis:

1. Inclusion of Equalized Freight Charges in the Assessable Value:
The appellant was engaged in manufacturing transformers and collected Rs. 35,98,220/- on account of equalized freight, which was not included in the assessable value. The Revenue contended that these charges should be included as per the amended provisions of Section 4 of the Central Excise Act, 1944. The Joint Commissioner found that the appellant collected fixed freight amounts, which were not actual transportation costs, and included these in the transaction value. The Tribunal held that since the transportation cost was fixed and not actual, it was rightly included in the assessable value as per Section 4(3)(d) and Rule 5 of the Central Excise Valuation Rules, 2000.

2. Inclusion of Labour and Painting Charges in the Assessable Value:
The appellant collected Rs. 11,96,563/- as labour and painting charges, which were also not declared. The adjudicating authority included these charges in the assessable value, stating that the appellant had full knowledge of the Act and Rules and did not pay the correct duty. The Tribunal concurred, noting that the appellant did not raise the contention that these charges were for repairs in the reply to the show cause notice, making it an afterthought. Thus, the inclusion of these charges in the assessable value was upheld.

3. Invocation of the Extended Period for Demand:
The appellant argued that the demand prior to 10-4-2001 was time-barred. The authorities inferred intentional duty evasion due to the appellant's knowledge of the amended Section 4. The Tribunal noted that approximately two-thirds of the duty demand was within the limitation period, indicating that a more specific opinion on the invocation of the extended period would have been desirable.

4. Financial Hardship and Pre-Deposit Requirement under Section 35F:
The appellant, declared a sick unit under the Sick Industrial Companies (Special Provisions) Act, 1985, contended that pre-deposit would cause undue hardship. The Tribunal, referencing the Supreme Court's decision in Metal Box India Limited, held that Section 22 of the Sick Industrial Companies Act does not apply to pre-deposit requirements under Section 35F. Considering the appellant's financial condition as a running concern, the Tribunal directed a pre-deposit of Rs. 5 lakhs within eight weeks, failing which the appeal would be dismissed.

5. Imposition of Penalty under Rule 173Q read with Section 11AC:
A penalty equal to the duty amount was imposed under Rule 173Q read with Section 11AC. The Tribunal found this penalty neither harsh nor excessive, noting that the provisions allowed for a penalty up to three times the value of the excisable goods.

Conclusion:
The Tribunal upheld the inclusion of equalized freight and labour and painting charges in the assessable value, confirming the duty demand and penalty. The invocation of the extended period was partially justified, with the majority of the demand within the limitation period. The appellant was directed to make a partial pre-deposit considering its financial condition, and the penalty imposed was deemed appropriate.

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