2011 (5) TMI 746 - AT - Central Excise

Demand - forfeited amount was disclosed by the appellant as miscellaneous income in its financial statements. That does not relate to manufacture or clearance of any excisable goods - submitted that the appellant has not concealed any fact since it has disclosed receipt and forfeiture of security in its account and the explanation for the same was furnished Held that - forfeited security is not additional consideration when nexus thereof with clearance is not evident from record, waiver of pre-deposit of the demand allowed during pendency of the appeal

Summary

Issues:
1. Treatment of forfeited security deposit as miscellaneous income in financial statements.
2. Allegation of concealment of facts and demand under Section 11A of Central Excise Act, 1944.
3. Requirement of pre-deposit for amortization of security deposits towards assessable value.

Analysis:
1. The appellant collected security deposits from clients to ensure contract execution, forfeiting them when defaults occurred. The appellant disclosed forfeited amounts as miscellaneous income, not related to excisable goods. The appellant argued no concealment, as receipts and forfeitures were accounted for. The demand under Section 11A was contested as baseless, seeking waiver for appeal hearing.

2. The respondent contended that gravure cylinders were made for client use, with security deposits for contract execution. It was argued that these deposits should be amortized towards assessable value, necessitating pre-deposit. After hearing both sides and reviewing records, the Tribunal considered the issue.

3. The Tribunal found it challenging to view forfeited security as additional consideration under Section 4 of the Central Excise Act, 1944. The nexus between forfeited security and clearance was not evident. Consequently, the Tribunal granted a waiver of the pre-deposit demand during the appeal's pendency, indicating a lack of clarity on the issue.

This judgment addressed the treatment of forfeited security deposits, alleged concealment of facts, and the requirement of pre-deposit for security deposit amortization. The Tribunal's decision to waive the pre-deposit highlighted the complexity in determining the nature of forfeited security in relation to excise laws, emphasizing the need for a clear nexus between forfeited amounts and clearance activities for tax assessment purposes.