2012 (9) TMI 456 - AT - Central Excise

Duty demand and penalty - demand has been confirmed on the ground that since the price for 2 nos. of Demo Bikes was 50% lower than the price fixed for retail customer, the price was not the sale consideration for sale Held that - Assessees have not been able to demonstrate any difference between the demo bikes and the normal bikes sold to dealers - The demo bikes are put to test and usage as desired by prospective buyers and the assessees also permits such usage to enhance the marketability of their bikes to overcome their competitors in attracting customers - transaction value cannot be accepted and the value of normal bikes has correctly been adopted and differential duty charged thereon - appeal is partly allowed by upholding duty demand and interest but setting aside penalty.

Summary

Issues:
Challenge to duty demand, applicability of Central Excise Act, 1944, difference between 'demo bikes' and 'normal bikes', penalty imposition.

Analysis:
The case involved a challenge to a duty demand of Rs. 8,328/- (BED) along with cess of Rs. 65/- and a penalty of Rs. 5,000/-, which was confirmed by the lower authorities. The demand was contested on the basis that the price for two 'Demo Bikes' was 50% lower than the price fixed for retail customers, leading to a dispute regarding the correct application of Sections 4(1)(a) and 4(1)(b) of the Central Excise Act, 1944.

Upon hearing both sides, it was noted that the assessees failed to demonstrate any substantial difference between the 'demo bikes' and the 'normal bikes' sold to dealers. The 'demo bikes' were used for testing and attracting prospective buyers, aiming to enhance marketability and outshine competitors. Consequently, the transaction value was deemed unacceptable, and the value of normal bikes was correctly adopted, resulting in a differential duty charge. The tribunal upheld the duty demand and interest in this regard.

However, the imposition of a penalty was deemed unwarranted as the assessees had invoiced and paid duty based on the transaction value, and the demand fell within the normal period of limitation. Therefore, the penalty was set aside by the tribunal.

In conclusion, the appeal was partly allowed, upholding the duty demand and interest while setting aside the penalty. The operative part of the order was pronounced in court on 6-7-2011.