2019 (2) TMI 11 - AT - Central Excise

Valuation - includibility - It is the case of the Revenue that the cost of the cylinders which the appellant charged from their customers should part of the assessable value being the additional consideration for sale of the BOPP films (since the cylinders are made for each customer) - extended period of limitation - Held that - These amounts were recovered from their customers as liquidated damages only when the customers did not place the orders as agreed to. Therefore, the cost which they incurred in getting the cylinders engraved as per the requirement of the customers was recovered from them. Therefore, these amounts cannot be included as additional consideration for sale in the assessable value of the final products. The nature of these receipts by the appellant from their customers could not be readily ascertained because there were no written agreements between the appellant and customers. As far as the remaining amount is concerned, as there is only evidence that these amounts have been collected by the appellant from their customers and there is no evidence that these amounts pertain to any other transaction between the appellant and customer we find that this is a consideration for sale of their final product. Accordingly, the demand on this account needs to be upheld Extended period of limitation - Held that - The books of accounts were not required to be submitted to the officers of Central Excise. The returns which were filed with the central excise Department must reflect the correct and total value of the amounts recovered by the appellant from the customers. They have not done so. Only investigation by the Department and the statements recorded by them revealed these facts - the extended period of limitation under Section 11A(2) of the Central Excise Act, has been correctly invoked - The amount of interest and penalties imposed upon the appellant also get correspondingly reduced. Appeal allowed in part.

Summary

Issues:
Appeal against Order-in-Appeal No. 70/2011 - Denovo adjudication order - Demand confirmation - Imposition of penalties - Liquidated damages - Assessable value - Extended period of limitation.

Analysis:
The case involved an appeal against Order-in-Appeal No. 70/2011, which was a denovo adjudication order confirming the demand, imposing penalties, and addressing the issue of whether certain amounts collected by the appellant should be considered as part of the assessable value. The appellant, a manufacturer of printed and laminated BOPP films, raised debit notes on customers for cylinder charges, which were not included in the assessable value. The dispute centered around whether these charges were liquidated damages or additional consideration for sale. The initial litigation led to a remand back to the original authority for further examination.

During the proceedings, the appellant produced letters from customers explaining the nature of the debit notes. Some letters indicated the amounts were for liquidated damages, while others did not specify. The lower authorities did not fully consider these letters, leading to the confirmation of demands and penalties. The appellant argued that the amounts were not part of the assessable value and relied on case laws to support their position.

The tribunal considered the arguments and evidence presented. It was established that some amounts collected through debit notes were indeed for liquidated damages, while others were for the sale of final products. The tribunal held that the demand should be reduced by the amount pertaining to liquidated damages. The extended period of limitation was deemed applicable due to the lack of proper disclosure in the appellant's records. The tribunal rejected the appellant's claim of revenue neutrality, stating it only applies when the appellant, not the customers, would benefit from CENVAT credit.

Ultimately, the tribunal partly allowed the appeal by reducing the duty demand by the amount related to liquidated damages. The interest and penalties were correspondingly reduced. The decision was pronounced on 29/01/2019 by the tribunal members, Mr. M.V. Ravindran and Mr. P. Venkata Subba Rao, with detailed reasoning provided in the order.