2005 (3) TMI 216 - AT - Central Excise

Valuation (Central Excise) - Demand of duty - Limitation - Confiscation of pre-recorded audio cassettes - HELD THAT - Following the ratio of the decision in M/s. Koch Rajesh CD India Pvt. Ltd. 2004 (6) TMI 492 - CESTAT, MUMBAI , we hold that the value of Audio Tape, inlay cards and screen printing frames is required to be included in the assessable value of the pre-recorded audio cassettes manufactured and cleared by the assessee to music companies during the period in dispute. The extended period of limitation is also available to the Department for the reason that the assessee suppressed the fact that they have not included the value of the three items supplied free of cost in the assessable value of pre-recorded audio cassettes and the plea of the appellants of knowledge of the Department that the items were being supplied free, based upon the Commissioner (Appeals) order dated 23-3-1985 is not acceptable, as the issue in dispute in the earlier proceedings is not identical to the issue involved in the present case - in that case the issue related to the adoption of the price charged by M/s. Music India Limited to its customers, as the value of the goods cleared by the assessee and it was held that the assessee and M/s. Music India Limited are not related persons and hence the proceedings were dropped. However, the duty demand cannot be sustained in its entirety for the reason that the basis of that demand namely, adoption of the wholesale price of the music companies, has been given up by the Adjudicating Authority. The demand will have to be re-worked out by first obtaining the wholesale price of the music companies and allowing of permissible deductions as set out in the CBE C Circular No. 619/10/2002 CX., dated 19-2-2002, by the Commissioner to whom the case is remanded for re-quantification of duty in the light of circular cited supra. The question of imposing penalties on all the appellants has to be considered afresh by the Commissioner, who shall pass fresh order after extending reasonable opportunity of hearing to them. The appeals are disposed of in the above terms.

Summary

Issues:
- Duty demand confirmation against the assessee for short paid duty on pre-recorded cassettes.
- Confiscation of seized goods with an option to redeem on payment of fine.
- Imposition of penalties under Rule 209A of the Central Excise Rules, 1944.
- Inclusion of value of materials supplied free in the assessable value of pre-recorded cassettes.
- Invocation of extended period of limitation for suppression of facts.
- Re-calculation of duty demand based on wholesale price of music companies.
- Reconsideration of penalties on all appellants.

Analysis:
1. The appeals arose from the Commissioner's order confirming a duty demand of Rs. 30,43,892 against the assessee for short paid duty on pre-recorded cassettes made on job work basis. The Commissioner also ordered the confiscation of seized goods with an option to redeem on payment of fine and imposed penalties under Rule 209A of the Central Excise Rules, 1944.

2. The demand was upheld by including the value of materials supplied free in the assessable value of pre-recorded cassettes. The extended period of limitation was invoked due to the suppression of facts by the assessee. The Tribunal referred to a previous decision in a similar case and held that the value of certain materials must be included in the assessable value of the cassettes.

3. The Tribunal rejected the arguments raised by the assessee, citing various legal precedents, and upheld the demand. However, it noted that the basis of the demand, i.e., the wholesale price of music companies, was given up by the Adjudicating Authority. The case was remanded for re-quantification of duty based on obtaining the wholesale price of music companies and allowing permissible deductions as per a circular.

4. The Tribunal directed the Commissioner to reconsider the imposition of penalties on all appellants, providing them with a reasonable opportunity of hearing. The appeals were disposed of accordingly, with the operative part pronounced in court.