2005 (4) TMI 187 - AT - Central Excise

Summary

Issues:
1. Challenge to levy and collection of duty on post manufacturing expenses and profit.
2. Disallowance of deductions on certain elements of expenses.
3. Denial of deductions on account of commission to agents and deemed credit facility.
4. Dispute over the deductibility of bonus to dealers, bank charges and interest, and freight and insurance expenses.
5. Imposition of penalties under Rule 173Q of the Central Excise Rules and Section 11AC of the Central Excise Act.

Issue 1: Challenge to levy and collection of duty on post manufacturing expenses and profit:
The appellants challenged the levy and collection of duty on post manufacturing expenses and profit, including commission to agents, bonus to dealers, bank charges, and freight and transportation charges. The High Court admitted the petition and directed the excise authorities to provisionally assess goods without including these expenses. The Supreme Court dismissed the appeals, affirming the deductions under certain heads of expenses. The appellants started claiming admissible deductions based on the Supreme Court decision. Subsequently, show cause notices were issued seeking to deny these deductions and proposing recovery of duty and penalties.

Issue 2: Disallowance of deductions on certain elements of expenses:
The High Court allowed deductions on specific elements of expenses but disallowed deductions on secondary packing, interest on security deposits, and interest on dealer's deposits against direct despatches. The Supreme Court dismissed the Revenue's appeal, confirming the deductions allowed by the High Court. However, the judgment based on concession does not have precedent value.

Issue 3: Denial of deductions on account of commission to agents and deemed credit facility:
Show cause notices were issued to the Thane unit seeking to deny deductions on account of commission to agents and deemed credit facility. The Commissioner confirmed the duty demand and imposed penalties, leading to appeals by the assessees challenging the orders.

Issue 4: Dispute over the deductibility of bonus to dealers, bank charges and interest, and freight and insurance expenses:
The Tribunal found that bonus to dealers should be allowed on an actual basis, remanding the case for reworking the duty demand. However, bank charges and interest, as well as freight and insurance expenses, were held not deductible from the assessable value. The Tribunal reasoned that when sales policy states that such charges are on the buyer's account, no deduction should be allowed.

Issue 5: Imposition of penalties under Rule 173Q and Section 11AC:
Considering the reduction of penalties due to the allowance of bonus to dealers on an actual basis and the limitation period aspect, the Tribunal reduced the penalties imposed under Rule 173Q and Section 11AC for the respective appeals.

This detailed analysis of the judgment covers the various issues involved, including challenges to duty levy, disallowance of deductions, denial of certain expenses, disputes over deductibility, and imposition of penalties.