2013 (5) TMI 569 - AT - Central Excise

Demand of duty/penalty - sale of the goods from the depots at a higher price - Held that - Matter remanded back to the original adjudicating authority for re-quantification of duty after extending the benefit of cum duty price. - addition of value of batteries in the UPS system - Held that - whenever the appellant was clearing the UPS systems along with the battery from their factory gate, they were discharging duty liability on the full value of the system inclusive of the value of the batteries. Therefore in absence of suppression or mala fide, the extended period of limitation was not available in respect of the above demand. The same is accordingly set aside along with setting aside of penalty on both the appellants.

Summary

Issues:
1. Undervaluation of goods sold from factory gate.
2. Inclusion of value of batteries in the assessable value of final product.
3. Applicability of cum duty price and penalty amount.
4. Demand for the period 1998-2001 and invocation of longer period of limitation.
5. Tribunal's decisions regarding inclusion of batteries in the value of UPS system.
6. Availability of extended period of limitation and penalty imposition.

Issue 1: Undervaluation of goods sold from factory gate
The appellant, engaged in manufacturing UPS systems, inverters, and transformers, was found to clear goods at a lower value from the factory gate and sell them at a higher value from their depots. Part of the demand against the appellant was confirmed on this ground. The duty amount confirmed was to the tune of Rs.5,94,696, with Rs.44,844 specifically related to the sale of goods from depots at a higher price. The appellant did not challenge this specific duty amount but sought relief on the point of cum duty price. The Tribunal upheld the demand but remanded the matter for re-quantification of duty after considering the benefit of cum duty price. The penalty amount was also to be decided afresh, and the applicability of the proviso under Section 11AC was to be examined.

Issue 2: Inclusion of value of batteries in the assessable value
Another part of the demand, amounting to Rs.12,89,852, was confirmed due to the addition of the value of batteries in the UPS systems sold by the appellant. The demand was for the period 1998-2001, and a Show Cause Notice was issued in August 2002, invoking the longer period of limitation. During the relevant period, Tribunal decisions indicated that bought-out batteries supplied with UPS systems were considered optional items, and their value should not be added to the value of the UPS system. The Tribunal found that in the absence of suppression or mala fide intent, the extended period of limitation was not applicable to this demand. Therefore, the demand related to the inclusion of battery value was set aside, along with the penalty imposed on the appellant.

Conclusion:
The Tribunal disposed of the appeals by upholding the demand related to undervaluation of goods sold from the factory gate but remanded the matter for re-quantification of duty. The demand for the inclusion of battery value in the assessable value was set aside, considering the Tribunal's previous decisions and the absence of suppression or mala fide intent. The penalty on both counts was also set aside.