1985 (8) TMI 365 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of Comprehensive Maintenance Charges in the Assessable Value.
2. Limitation Period for Issuing Show-Cause Notices.
3. Financial Hardship and Balance of Convenience for Pre-Deposit Waiver.

Issue-Wise Detailed Analysis:

1. Inclusion of Comprehensive Maintenance Charges in the Assessable Value:
The petitioner-company manufactures T.V. sets and sells them to wholesale dealers. After the sale, they raise bills for comprehensive maintenance charges (CMS). The Revenue contends that these CMS charges, excluded from the assessable value, should be included. The Assistant Collector of Central Excise issued two show-cause notices alleging wilful mis-statement and suppression of facts by the petitioner-company, leading to demands of Rs. 74,160 and Rs. 21,16,030.75, respectively. The Collector of Central Excise confirmed these demands, totaling Rs. 21,90,190.75, and imposed a penalty of Rs. 10 lakhs under Rule 173Q.

2. Limitation Period for Issuing Show-Cause Notices:
The petitioner-company argued that the demands were barred by the statutory limitation period of six months, as the show-cause notices were issued after this period. The company had informed the Superintendent of Central Excise about their sale pattern and CMS charges on 8th July 1982. Despite this, the lower authority applied an extended limitation period of five years, citing fraud and suppression of facts. The Tribunal noted that the question of limitation is a mixed question of law and fact and reserved its opinion for the final hearing. However, this contentious point was considered for interim relief.

3. Financial Hardship and Balance of Convenience for Pre-Deposit Waiver:
The petitioner-company sought waiver of the pre-deposit under Section 35F of the Central Excises and Salt Act, citing financial hardship. The company claimed that its liquid assets were insufficient to cover the disputed amounts, and depositing these amounts would halt its operations, affecting employees. The company offered an undertaking not to dispose of its fixed assets during the appeal's pendency. The Tribunal considered the liquidity position, referring to the Supreme Court's observations in the Dunlop India Ltd. case and the U.P. Lamination case, emphasizing the need for balance of convenience and public interest.

The Tribunal examined the company's financials, noting a net profit of Rs. 7.07 lakhs, a general reserve of Rs. 4.40 lakhs, a declared dividend of 12.5%, current assets of Rs. 1.58 crores, and a cash balance of Rs. 1.36 lakhs. The Tribunal referenced the Supreme Court's definition of "liquidity" and "liquid assets," rejecting the narrow interpretation that only cash-in-hand constitutes liquid assets. The Tribunal concluded that liquidity should consider all convertible assets.

Considering the merits, the Tribunal decided not to require the entire duty and penalty amounts to be deposited. Instead, it directed the petitioner-company to deposit 25% of the disputed duty amount within six weeks, waiving the pre-deposit of the penalty amount. Upon this deposit, the recovery of the remaining amounts would be stayed until the appeal's disposal.

Conclusion:
The application was partly allowed, directing the petitioner-company to deposit 25% of the disputed duty amount within six weeks. The pre-deposit of the penalty amount was waived, and recovery of the remaining amounts was stayed pending the appeal's outcome.