2017 (6) TMI 374 - AT - Central Excise

Valuation - Quantity discount - includibility - Held that - quantity discount will not be allowable for determination of duty liability u/s 4A - the appellant assessee has been following the long standing practice of granting such quantity discount to their traders. This was being mentioned in ER-1, RG-1 and invoices regularly. The records of the assessee were also being periodically audited by the Department. Consequently, any allegation of willful suppression of facts with intention to evade payment of duty cannot be held against the appellant - demand restricted for normal period. Classification of goods - black phenyl - classified under CTH 3808.90 or CTH 3808.10? - Held that - the classification of these goods have been decided by the Hon ble Supreme Court in the appellants own case for an earlier period under 3808.10 - the classification of the goods under 3808.10 which will be entitled to abatement of 35% is upheld. Clandestine removal - Seizure of goods at dealers premises - goods were received from the appellant s factory without payment of duty - Held that - The seized goods are claimed to be those supplied free along with invoiced quantity. Consequently we do not find any justification for confiscation of the same at the dealer s premises - confiscation, redemption fine and penalty set aside. Clandestine removal - Production as per input-output ratio - demand on the ground that production of goods, was suppressed when it is estimated in terms of the input output ratio - Held that - The allegations of clandestine production and clearance are grave and hence is required to be backed by tangible evidence. The onus is on the Revenue to establish on the basis of evidences, the quantity of goods alleged to have been clandestinely manufactured and cleared - In the present case, other than the mathematical projection of the possible production, no corroborative evidence has been produced by Revenue to support the charge of clandestine manufacture and clearances - without tangible evidence, charge of clandestine clearances cannot be upheld - demand set aside. Clandestine removal - seizure at factory - Held that - the goods said to be excess were found within the factory - since the goods remained within the factory there is no justification for seizure and confiscation of such goods - confiscation, redemption fine and penalty set aside. The case is remanded to the adjudicating authority for the limited purpose of re-quantifying the demand and to re-determine penalties - appeal allowed by way of remand.

Summary

Issues:
1. Quantity discount
2. Classification dispute
3. Seizure of goods at dealers premises
4. Production as per input: output ratio
5. Seizure at Factory

Quantity discount:
The appellant, a manufacturer of soap-based products, was found clearing additional quantities as free supplies without payment of duty, leading to a duty demand confirmation. The appellant argued that quantity discounts should be allowable, citing a Tribunal decision. However, a Larger Bench judgment clarified that quantity discounts are not allowable for duty liability determination. Despite the appellant's long-standing practice of granting quantity discounts, the demand was restricted to within the normal time limit due to lack of evidence of willful suppression.

Classification dispute:
The appellant classified goods under a specific category for duty payment, but the Department disagreed, leading to a differential duty demand. Although a CBEC circular supported the appellant's classification, a Supreme Court decision favored the Department's view. Consequently, the goods were classified as per the Supreme Court decision, resulting in the upheld duty demand.

Seizure of goods at dealers premises:
Goods seized at dealers' premises were believed to be received without duty payment. The appellant claimed these goods were part of free supplies under a discount scheme. As quantity discounts were a regular practice, the demand was restricted to the normal time limit. Confiscation of goods at dealers' premises was deemed unjustified, leading to the vacation of the confiscation order and associated penalties.

Production as per input: output ratio:
A duty demand was raised based on alleged suppressed production, but the appellant argued that the calculation did not consider all relevant factors, such as the use of raw materials in another product. The Revenue failed to provide tangible evidence supporting the charge of clandestine clearances, leading to the duty demand being set aside due to lack of corroborative evidence.

Seizure at Factory:
Unaccounted goods valued at a significant amount were seized at the factory, with the appellant explaining that these were yet to be entered in records. As the goods were found within the factory premises and the explanation deemed justified, the confiscation was set aside, and associated penalties were vacated. The goods were to be accounted for and cleared on payment of duty.

The appeals were disposed of with specific directions for each issue, including upholding duty demands within normal time limits, classifying goods as per the Supreme Court decision, setting aside duty demands on seized goods, vacating penalties, and remanding the case for re-quantification of demands and penalties.