2007 (6) TMI 98 - AT - Central Excise

Valuation(Central Excise) - Revenue contented that (i) price is influenced by the relationship between the manufacturer(VPBIL) and distributor(VPL) (ii) Appellant is the clandestine remover - Held that revenue contention was not justified and set aside the demand

Summary

Issues Involved:
1. Relationship and mutuality of interest between VPBIL and VPL affecting the price.
2. Alleged suppression of production and clandestine removal of goods.
3. Justification of penalties under Section 11AC and Rule 209A.

Issue-wise Detailed Analysis:

1. Relationship and Mutuality of Interest:
The primary issue was whether the relationship between VPBIL and VPL influenced the price at which goods were sold by VPBIL. The adjudicating authority initially held that VPL, being a related person under Section 4 of the Central Excise Act, 1944, influenced the valuation. However, the Commissioner (A) found no mutuality of interest, stating that VPBIL, a public limited company, sold goods to various buyers, not exclusively to VPL. The Commissioner (A) also noted that the price charged to VPL was the same as that charged to other buyers, and the relationship did not influence the price. The Tribunal agreed with this finding, distinguishing the case from Calcutta Chromotype Ltd. v. CCE, Calcutta, as VPBIL is a public limited company and VPL is a private limited company, unlike the entities in the cited case. Therefore, the Tribunal concluded there was no mutuality of interest affecting the price.

2. Suppression of Production and Clandestine Removal:
The second issue was the alleged suppression of production and clandestine removal of 274 metric tonnes of paper. The adjudicating authority had based its findings on the difference between the production schedule and the actual production recorded in RG-I. However, the Tribunal found that the Revenue did not provide corroborative evidence to substantiate the claim of clandestine removal. The Tribunal emphasized that the burden of proof lies with the department, which was not met in this case. Consequently, the Tribunal did not uphold the Revenue's conclusion of clandestine removal.

3. Justification of Penalties:
The third issue involved the justification of penalties under Section 11AC and Rule 209A. The adjudicating authority had imposed penalties on VPBIL and its directors. However, the Commissioner (A) set aside these penalties, stating there was no specific allegation that any director knowingly dealt with excisable goods liable for confiscation. The Tribunal upheld this view, noting that penalties cannot be imposed without specific allegations and evidence of the role played by individuals in committing the alleged offense. Additionally, the Tribunal found that the demand for differential duty was not sustainable, further negating the justification for penalties.

Conclusion:
The Tribunal set aside the following orders demanding differential duty from VPBIL:
1. The Order-in-Original No. 7/2003 dated 11-10-2003.
2. The Order-in-Appeal No. 96-102/2006 dated 22-2-2006.

The Tribunal upheld the Commissioner (A)'s order dated 21-9-2004, dismissing the department's appeal and allowing the appeals of the parties.