2006 (7) TMI 45 - AT - Central Excise

Central Excise Valuation Goods sold by manufacturer to appellants at price lower than to his depots price, not to be acceptable for assessable value Demand is time barred as fact of payment of royalty was suppressed and no price list was filed Interest and penalty cannot be imposed u/s 11AB and 11AC of CEA, prior to 28.9.1996

Summary

Issues:
Assessment of sales value for excise duty, inclusion of royalty in assessable value, related party transactions, time-barred demand, imposition of interest and penalty under Section 11AB & 11AC.

Assessment of Sales Value for Excise Duty:
The appellants manufactured Portable Torches under the brand name "NOVINO" owned by M/s. Lakhanpal National Ltd. (LNL). They paid royalty to LNL and sold 50% of the torches themselves and the other 50% through LNL. The Adjudicating Commissioner ordered assessment of sales to LNL at the same price as the appellants' own depot sales. The appellants contended that LNL was not a related party and royalty need not be included in assessable value, citing relevant case laws. The tribunal found that sufficient evidence existed to show that price was not the sole consideration of sale, leading to the rejection of the appellants' argument.

Inclusion of Royalty in Assessable Value:
The tribunal analyzed Section 4 of the Central Excise Act, which required the price at which goods are sold to be accepted as assessable value if the buyers were not related parties and price was the sole consideration. Despite the appellants' argument that they and LNL were not related parties, the tribunal found that price was not the sole consideration in the transactions between them, especially considering the nature of the sales and pricing strategy employed by the appellants.

Related Party Transactions:
Even though the appellants argued that LNL was a different class of buyer, the tribunal noted that 50% of the goods were sold to their own depot and the other 50% to LNL. The tribunal held that the price for sales to LNL should be equal to what the appellants charged for transferring goods to their own depot, as both channels ultimately sold the torches at the same retail price nationwide.

Time-Barred Demand:
The tribunal rejected the contention that the demand was time-barred, as various officers of the appellant company had admitted to not declaring the ownership of the trademark "NOVINO" belonging to LNL, among other discrepancies. The non-disclosure of agreements and royalty, along with the failure to submit price lists as required, justified the rejection of the time-barred argument.

Imposition of Interest and Penalty under Section 11AB & 11AC:
While the tribunal agreed that interest and penalty could not be imposed before 28.9.1996, they found that for the period after that date, the imposition was justified. Considering the circumstances, the penalty was reduced, and the confiscation of assets was set aside. Ultimately, the tribunal partly allowed the appeal based on the above analysis.