1988 (4) TMI 263 - AT - Central Excise

Summary

Issues Involved:
1. Validity of the revised price list submitted by the appellants.
2. Nature of sales to wholesale dealers and their independence.
3. Allegations of suppression of facts and mis-declaration by the appellants.
4. Validity of the show cause notice and the period of limitation.
5. Imposition of penalty and confiscation of assets.

Detailed Analysis:

1. Validity of the Revised Price List:
The appellants submitted a revised price list on 13.12.1972, claiming a change in their sales pattern by selling directly to wholesale dealers instead of through their sole selling agents, Kismat Pvt. Ltd. The Assistant Collector approved this revised price list effective from 1.1.1973. The Department, however, investigated and concluded that the change in the sales pattern was not genuine, and the wholesale dealers were not independent entities but were under the control of Kismat.

2. Nature of Sales to Wholesale Dealers and Their Independence:
The Department issued a show cause notice alleging that the so-called wholesale dealers were actually working under the control and direction of the appellants. The appellants argued that they had genuinely withdrawn the sale distributorship from Kismat and were selling directly to independent wholesale dealers. They provided names of seven dealers they claimed to be independent. The Department, however, argued that these dealers were not independent, citing various conditions imposed on them, such as operating on given routes, returning unsold goods, depositing cash with Kismat or the appellants, and using Kismat's petrol pump and loaders.

The Tribunal examined the cases of the seven dealers and concluded that the evidence did not support the claim of independence. The statement of Sh. Sodawala (Janta Soft Drinks) and other statements indicated that the dealers were not independent but were commission agents. The Tribunal upheld the Collector's finding that the sales to these dealers were not at arm's length and were not genuine sales to independent wholesale dealers.

3. Allegations of Suppression of Facts and Mis-declaration:
The Department accused the appellants of suppression of facts and deliberate mis-declaration with the intention to evade payment of duty. The appellants denied these allegations, arguing that the wholesale dealers were genuine and independent. The Tribunal, however, found that the appellants had misrepresented the nature of their sales to evade Central Excise duty.

4. Validity of the Show Cause Notice and the Period of Limitation:
The appellants argued that the show cause notice was barred by limitation under Section 40 of the Central Excises and Salt Act and that the Department could demand short-levied duty only for a period of 12 months prior to the date of the show cause notice under Rule 10 of the Central Excise Rules, 1944. The Tribunal, however, upheld the Collector's demand for duty, finding that the appellants had misrepresented the nature of their sales.

5. Imposition of Penalty and Confiscation of Assets:
The Collector imposed a penalty of Rs. 8 lakhs on the appellants and confiscated all land, building, plant, and machinery of the appellants under Rule 173Q of the Central Excise Rules, giving an option to redeem the same on payment of a fine of Rs. 25 lakhs. The Tribunal found that the penalty was correctly imposed but reduced it to Rs. 3.5 lakhs, considering the seriousness of the offence. The Tribunal also upheld the penalty of Rs. 1000 under Rule 210 of the Central Excise Rules, 1944. However, the Tribunal set aside the confiscation of land, building, plant, and machinery, finding it unnecessarily harsh and unjustified.

Conclusion:
The appeal was rejected except for the modification of the penalty and setting aside the confiscation of assets. The appellants were granted consequential relief on account of these modifications.