2007 (7) TMI 57 - AT - Central Excise

Valuation (Central excise ) Revenue contended that the extra consideration received by the appellant inform of freight, insurance charges and other expenses related to sale shall be includible in the assessable value of the goods Held that revenue contention was correct and demand and penalty sustained

Summary

Issues Involved:
1. Interpretation of transit insurance charges collected by the appellant company.
2. Assessable value determination based on collected charges.
3. Penalty imposition on the appellant company and its Director.

Issue 1: Interpretation of Transit Insurance Charges:

The case involved the appellant company engaged in manufacturing sheet glass under Chapter sub-heading 1702 of the Central Excise Tariff Act. The investigation revealed that the company collected amounts labeled as transit insurance charges from customers but paid minimal premiums to the insurance company. The Commissioner contended that these charges were not related to transit insurance but were for breakage reimbursement. The appellant argued that the charges were for actual insurance cover due to the lack of transit risk coverage by insurance companies. The tribunal examined the purpose of the charges and concluded that they were not insurance charges but reimbursement for potential breakages, as confirmed by the company's director.

Issue 2: Assessable Value Determination:

The Commissioner calculated the additional consideration collected by the appellant company as insurance charges and included it in the assessable value. For the period from 1-2-99 to 29-9-03, a demand of Rs. 3,01,20,540 was confirmed, with penalties imposed under Section 11AC. The tribunal analyzed the nature of the charges collected at a fixed rate of 7% and found them to be for breakage reimbursement, not insurance. It cited legal precedents to support the exclusion of such charges from the assessable value. The tribunal upheld the demand and penalty based on the collected charges not being insurance-related.

Issue 3: Penalty Imposition:

The tribunal found the penalty imposed on the company justified due to the misrepresentation of charges as insurance and upheld the penalty under Section 11AC. However, the penalty on the Director was revoked as there was no evidence of personal gain or direct involvement in the evasion. The tribunal rejected the appeals filed by the appellant company but allowed the appeal by the Director.

In conclusion, the tribunal determined that the charges collected by the appellant company were not transit insurance but reimbursement for potential breakages. The demand and penalties were upheld based on the misrepresentation of charges. The penalty on the Director was revoked due to lack of evidence of personal involvement in the evasion.