2009 (10) TMI 488 - AT - Central Excise

Demand- limitation - Investigation undertaken by the authorities revealed that during the period January, 2000 to July, 2004, the appellants had adopted incorrect value for payment of duty. The original authority demanded differential duty of Rs. 8,41,043/- invoking larger period under Section 11A of the Act. Held that - Assessee have a bonafide belief regarding such computation. Longer period not invocable. Assessee liable for normal period, matter remanded for such computation of duty liability. valuation - held that - packing charges recovered prior to 01.07.2000 when transaction value introduced. Impugned charges cannot form part of normal price goods normally sold without any packing, however for part of transaction value post 30.6.2000. Further held that- collection of packing charges suppressed from department and not reflected in monthly return. Demand invoking larger period pertaining to such charges sustainable.

Summary

Issues:
- Incorrect valuation for payment of excise duty
- Short payment of excise duty
- Demand of duty invoking larger period under Section 11A of the Central Excise Act, 1944
- Denial of deemed credit for processed fabrics
- Penalty imposition under Section 11AC of the Act and Rule 25 of the Central Excise Rules 2001/2002
- Dispute regarding computation of value for processed fabrics
- Application of bonafide belief in the valuation method
- Discrepancy in the treatment of packing charges

Analysis:

The case involved M/s. Palayam Textiles Processors (PTP) undertaking processing of grey fabrics and paying duty based on the landed cost of raw material plus job charges. An investigation revealed that PTP had adopted an incorrect value for duty payment, resulting in a short payment of excise duty. The original authority demanded the differential duty, imposed penalties, and denied deemed credit for processed fabrics. The Commissioner (Appeals) upheld the original authority's decision.

In the appeal, PTP argued that the short payment was due to their bonafide belief in the valuation method based on the length of processed fabrics. They cited conflicting Tribunal decisions and claimed that the larger period under Section 11A could not be invoked. The Tribunal noted the different views on valuation methods but ultimately relied on the decision in the case of Ramkumar Mills Pvt. Ltd. to support PTP's bonafide belief. The Tribunal held that the longer period could not be validly invoked for the demand of duty.

Regarding packing charges, the Tribunal differentiated between charges collected before and after specific dates. Charges collected before 1-7-2000 were not considered part of the normal price, while post-3-6-2000 charges were included. The Tribunal sustained the demand related to suppressed packing charges but allowed deemed credit for the duty initially short paid.

The appeal was partially allowed, directing the original authority to compute the liability for the normal period and consider PTP's entitlement to deemed credit in de novo proceedings. The decision on packing charges was upheld, and the case was remanded for further proceedings with PTP's involvement.