2010 (11) TMI 82 - SC - Central Excise

Demand limitation - differential duty demanded under Rule 9(A) of Central Excise Rules 1944 read with Section 11A of the Central Excise Act, 1944 together with penalty and interest - additional consideration over and above the assessable value declared by assessee and additional consideration - no suppression of facts on the part of the assessee - entire transaction between the parties was on the basis of the agreement which was within the knowledge of the Department - It was not the allegation in the show cause notice that the assessee received any direct and indirect consideration over and above as to what has been agreed under the agreement - price fixation was in accordance with the formula agreed to between the parties which has been specifically incorporated in the source agreement Appeal dismissed

Summary

Issues:
1. Whether the show cause notice demanding differential duty under Rule 9(A) of Central Excise Rules 1944 was justified.
2. Whether the show cause notice issued for the period from February 1995 to February 1999 was barred by limitation.
3. Whether the Department was justified in invoking the extended period of limitation under Section 11A of the Central Excise Act, 1944.
4. Whether M/s. Monsanto received direct or indirect consideration over and above what was agreed under the sourcing agreement with BBLIL/HLL.

Analysis:

1. The case involved a dispute regarding differential duty demanded by the Department from M/s. Monsanto under Rule 9(A) of Central Excise Rules 1944. The Department alleged that M/s. Monsanto received additional consideration beyond the declared assessable value, leading to the show cause notice dated 27-3-2000. M/s. Monsanto contended that the transaction with BBLIL/HLL was on a principal-to-principal basis with price as the sole consideration. The Commissioner rejected M/s. Monsanto's objections, citing suppression of material facts.

2. The issue of limitation arose concerning the show cause notice issued for the period from February 1995 to February 1999. M/s. Monsanto argued that the notice was time-barred, as the sourcing agreement was made available to the Department in March-April 1995, and there was no suppression of facts. The Commissioner disagreed, stating that full details of the settlement were not disclosed, leading to the rejection of the limitation defense.

3. The Department invoked the extended period of limitation under Section 11A of the Act, alleging direct and indirect considerations received by M/s. Monsanto from BBLIL/HLL. However, the Tribunal, after detailed consideration, found no such considerations and held that the show cause notice issued on 27-3-2000 was barred by limitation. The Tribunal concluded that all transactions were based on the agreement known to the Department since March-April 1995.

4. The crucial question of whether M/s. Monsanto received direct or indirect consideration beyond the agreement terms was extensively debated. The Tribunal's decision in a similar case supported M/s. Monsanto's stance. The Supreme Court upheld the Tribunal's view, emphasizing that the Department had no evidence of additional consideration received by M/s. Monsanto. The Court found no merit in the Department's contention and dismissed the appeals, affirming that the show cause notice was indeed barred by limitation based on the facts and circumstances of the case.