2000 (5) TMI 119 - AT - Central Excise

Summary

Issues Involved:
1. Undervaluation i.e., difference in price between ex-factory and ex-depot.
2. Non-inclusion of cost of advertisement expenses incurred by one of its distributors.
3. Non-exclusion of interest-free deposit in the assessable value made by one of the distributors.
4. Substitution of the grade of plywood.

Issue-wise Analysis:

1. Undervaluation i.e., difference in price between ex-factory and ex-depot:

The respondents argued that their factory gate sales price, approved by the proper officer under Section 4(1)(a), should be adopted for duty purposes for sales made through depots. They contended that the factory gate sales price was regularly verified and approved by the Central Excise authorities. The Commissioner accepted this contention, noting that the department failed to provide documentary evidence proving the factory gate price was artificially low. The Commissioner referenced the Supreme Court's judgment in Indian Oxygen v. C.C.E. and concluded that the ex-factory price must be accepted unless proven otherwise. The Tribunal upheld this decision, stating that the ex-factory price was genuine and satisfied Section 4(1)(a) requirements, and the department had not shown any additional consideration or extra commercial consideration received by the assessee.

2. Non-inclusion of cost of advertisement expenses incurred by one of its distributors:

The respondents made submissions regarding the inclusion of advertisement costs, but this issue was not part of the present appeal. The Commissioner confirmed the demand of duties on this ground, but the Tribunal later set aside this portion of the order, ruling that advertisement expenses incurred by the dealer were not includible in the assessable value. This decision was confirmed by the Supreme Court.

3. Non-exclusion of interest-free deposit in the assessable value made by one of the distributors:

Similarly, the issue of interest-free deposits was not part of the present appeal. The Commissioner confirmed the demand of duties on this ground, but the Tribunal later ruled that notional interest on interest-free deposits by the dealer was not includible in the assessable value. This decision was also confirmed by the Supreme Court.

4. Substitution of the grade of plywood:

The respondents made submissions regarding the differential demand of duty on the substitution of one grade of plywood with another. The Commissioner confirmed the demand of duties on this ground. The Tribunal upheld this portion of the order, confirming the demand related to the substitution of grades.

General Observations:

The Tribunal noted that the Revenue's appeal lacked merit as the ex-factory price was available and genuine, satisfying the requirements of Section 4(1)(a). The Tribunal emphasized that the department had not provided evidence of any flow back of money or additional consideration to the assessee. The Tribunal also highlighted that the cost structure verification conducted by the Revenue's cost department found the declared prices to be accurate. The Tribunal further observed that the issue of limitation was in favor of the respondents, as the demands were raised beyond the permissible period and had been previously held to be time-barred by the Tribunal and confirmed by the Supreme Court.

Conclusion:

The Tribunal rejected the Revenue's appeal, upholding the Commissioner's order relating to the vacation of the show cause notice for the demand of duty of Rs. 18,97,91,347/-. The Tribunal also noted that the respondents had a strong case on limitation, further supporting the decision to reject the Revenue's appeal.