2004 (6) TMI 127 - AT - Central Excise

Valuation (Central Excise) - Transportation cost - Demand - Limitation - Extended period - Suppression - Evidence

Summary

Issues Involved:
1. Under-valuation of excisable goods.
2. Inclusion of transportation and freight charges in the assessable value.
3. Invocation of the extended period for demand.
4. Imposition of penalty.

Detailed Analysis:

1. Under-valuation of excisable goods:
The appellants were engaged in manufacturing H.R. Coils/sheets/plates and were accused of under-valuing their excisable goods by misdeclaring the place of removal and not including certain expenses incurred up to the buyer's premises. The Department alleged that the appellants were evading central excise duty by not including transportation charges in the assessable value when goods were delivered to customers' premises.

2. Inclusion of transportation and freight charges in the assessable value:
The appellants argued that transportation and freight charges should not be included in the assessable value when the sale is effected at the factory gate. They cited several judgments, including those of the Apex Court, which supported their claim that ex-factory prices should be the basis for determining the assessable value. The Tribunal agreed with the appellants, stating that once goods are handed over to the transporter, the sale is deemed to have been effected at the factory gate. The Tribunal referred to multiple precedents, such as Indian Oxygen Ltd. v. CCE and Escorts JCB Ltd. v. CCE, which held that transportation charges collected after the sale at the factory gate should not be included in the assessable value.

3. Invocation of the extended period for demand:
The Department had invoked the larger period for recovery of sums not included for the years 1997-98 to 1999-2000, alleging suppression of facts. However, the appellants contended that they had made declarations to the Department every year and that no discrepancies were noticed during the departmental audit in 1999. The Tribunal found that the appellants had disclosed the collection of transportation and freight charges in their price list and declarations, thus ruling out suppression of facts. Consequently, the demands were held to be time-barred.

4. Imposition of penalty:
The Commissioner had upheld the imposition of a penalty equivalent to the duty required to have been paid, citing suppression of facts. However, the appellants argued that mens rea was not established and that Section 11AC of the Central Excise Act, 1944, could not be invoked. The Tribunal, agreeing with the appellants, set aside the penalty, emphasizing that mere statements against the legal position do not change the situation and that the documentary evidence indicated the sale was effected at the factory gate.

Conclusion:
The Tribunal concluded that the transportation and freight charges for delivery of goods to the customers' place should not be added to the assessable value when the sale is effected at the factory gate. The appellants' appeal was allowed, the impugned order was set aside, and the demands were deemed time-barred. The penalty imposed was also set aside.