2007 (9) TMI 519 - AT - Central Excise

Demand - valuation - contract price inclusive of excise duty or otherwise? - recovery under section 11D - extended period of limitation

Summary

Issues:
- Interpretation of small scale exemption for PVC pipes
- Allegation of collecting excess duty
- Invocation of extended period for demanding duty
- Imposition of personal penalty on the director

Interpretation of Small Scale Exemption for PVC Pipes:
The case involved an appellant company manufacturing PVC pipes availing small scale exemption during specific years. They had rate contracts with fixed prices, inclusive of excise duty, for supply to a specific board. The duty rates varied based on different clearances slabs. The original authority found the company collected duty in excess of what was paid to the department, leading to a demand for duty recovery, interest, and penalties. The Commissioner (Appeals) upheld this decision. The appellant argued that their final price remained constant regardless of duty rates paid, and they did not collect more than shown in the excise invoice.

Allegation of Collecting Excess Duty:
The appellant contended that they did not collect any amount exceeding the duty shown in the excise invoice. They emphasized that the demand for duty was incorrect as their final price did not change despite varying duty rates. Moreover, they challenged the invocation of the extended period for demanding duty, claiming it was time-barred. Additionally, they argued against the imposition of a personal penalty on the director, deeming it arbitrary and unsustainable.

Invoking Extended Period for Demanding Duty and Imposition of Personal Penalty:
The appellant disputed the application of the extended period for demanding duty, asserting that the show cause notice issued was time-barred. They also contested the imposition of a significant personal penalty on the director, arguing it was excessive considering the alleged duty evasion. The appellant maintained that they did not collect an excess amount of duty and thus should not be penalized disproportionately.

Judgment Analysis:
The Tribunal analyzed the case, noting that the appellant, as a small scale unit, paid duties at varying rates based on clearances. Despite fluctuating duty rates, the appellant supplied goods at fixed prices under contract, inclusive of duty. The Tribunal observed that the contract price was cum-duty, and no evidence indicated the collection of excess duty from customers. Referring to Section 11D of the Central Excise Act, the Tribunal emphasized the requirement to deposit collected duties with the government. However, in the absence of evidence showing the collection of duty amounts exceeding payments to the department, the Tribunal ruled in favor of the appellant, allowing the appeals with consequential relief.