2007 (9) TMI 505 - AT - Central Excise

Valuation - Place of removal - Depot sales - imposition of Penalty under Rule 209A - interest under section 11AB - time limitation

Summary

Issues Involved:
1. Alleged cash payments over and above declared ex-factory prices.
2. Determination of assessable value for Central Excise duty.
3. Validity of factory gate price as the basis for valuation.
4. Limitation period for demand of differential duty.
5. Imposition of penalties on the company and its officers.
6. Calculation of differential duty and whether extra realizations should be considered as cum-duty price.

Detailed Analysis:

1. Alleged Cash Payments Over and Above Declared Ex-factory Prices:
The appellants were found to be realizing cash payments over and above the declared ex-factory prices for sales made from the factory, branches, and consignment agents. The investigation revealed that the factory gate price was not genuine and was used to cover up higher transactions from branches and depots. Evidence included seized documents from the Calcutta depot showing cash receipts amounting to Rs. 2,83,08,948/-.

2. Determination of Assessable Value for Central Excise Duty:
The department concluded that the factory gate price was not the genuine price due to the cash realizations over and above the invoice price. The appellants argued that the factory gate price should be the basis for valuation as per the Supreme Court judgment in Indian Oxygen Ltd. v. C.C.E. and Elgi Equipments Ltd. v. C.C.E. However, the Tribunal found that for the Calcutta region, the factory gate price was not reliable due to consistent extra cash collections.

3. Validity of Factory Gate Price as the Basis for Valuation:
The Tribunal held that the factory gate price could not be ignored for general sales but had to be rejected for the Calcutta region due to proven extra cash collections. It was established that the appellants charged different prices for different grades of plywood, which was a trade practice and not artificial.

4. Limitation Period for Demand of Differential Duty:
The appellants contended that the demand was not maintainable due to the approval of price lists and clearances based on approved ex-factory gate prices. The Tribunal did not address this issue in detail, focusing instead on the substantive evidence of cash collections.

5. Imposition of Penalties on the Company and Its Officers:
The Tribunal found that penalties under Section 11AC were not applicable as they were introduced after the relevant period. However, penalties were justified under Rule 173Q due to evasion of duty through fraud and suppression of facts. Penalties on individuals under Rule 209A were set aside as there was no finding that the goods were liable to confiscation.

6. Calculation of Differential Duty and Whether Extra Realizations Should Be Considered as Cum-duty Price:
The Tribunal determined that the extra cash collected should not be treated as cum-duty price based on the Supreme Court decision in Amrit Agro Industries Ltd. The correct amount for differential duty was calculated as Rs. 41,99,460/-, including an additional amount of Rs. 8,68,829/- from parallel invoices.

Conclusion:
The Tribunal upheld the demand for differential duty based on cash collections over and above the declared prices for the Calcutta region but reduced the penalty on the company to Rs. 8 lakhs. Penalties on individuals were set aside due to the absence of confiscation findings. The appeals were disposed of accordingly.