2010 (7) TMI 867 - AT - Central Excise

Summary

Issues involved: Undervaluation of final product, related person under Section 4 of Central Excise Act, limitation period for raising demand.

Undervaluation of final product: The appellant, engaged in manufacturing bulk drugs, supplied products exclusively to a joint venture company. The demand was confirmed against the appellant for undervaluation of their final product for the period July 2000 to July 2001. The Commissioner held the buyer company as a related person to the appellant, leading to the demand for duty confirmation. However, the appellant contended that the buyer company did not meet the criteria of being a related company as per the Central Excise Act. The Tribunal found that a similar enquiry was raised against the appellant in 1996, which was duly answered, indicating that the entire facts were known to the department. Therefore, the demand raised in 2005 was beyond the limitation period, and the impugned order was set aside on this ground, granting relief to the appellant.

Related person under Section 4 of Central Excise Act: The Commissioner considered the buyer company as a related person to the appellant based on their inter-connected status under the Monopolies and Restrictive Trade Practices Act and Section 4 of the Central Excise Act. However, the appellant argued that the transaction value should only be adopted when related as per specific criteria, which they did not meet. The Tribunal noted that the enquiry raised in 1996 regarding undervaluation of the final product was already known to the department, and the demand raised in 2005 was time-barred. Therefore, the Tribunal set aside the impugned order on the basis of limitation, without delving into the merits of the case.

Limitation period for raising demand: The Tribunal found that the demand raised in 2005 for undervaluation of the final product was beyond the limitation period. Despite the amendment to Section 4 of the Central Excise Act in 2000, the Tribunal held that the department took five years to issue the show cause notice, indicating no mala fide on the part of the appellant. As the entire facts were known to the Revenue since the enquiry in 1996, the Tribunal concluded that the longer period was not available to the department to raise the demand. Consequently, the impugned order was set aside on the grounds of limitation, and the appeal was allowed in favor of the appellant.