1990 (7) TMI 242 - AT - Central Excise

Summary

Issues: Dispensation of pre-deposit of duty amount. Interpretation of Valuation Rules regarding inclusion of profit element in assessable value. Allegation of suppression by not disclosing gross profit in price list.

In this judgment delivered by the Appellate Tribunal CEGAT, New Delhi, the applicants sought dispensation of the pre-deposit of duty amount of Rs. 19,219.45 demanded from them. The Assistant Collector dropped the proceedings against the applicants, ruling in their favor on the duty leviable on the additional amount and the time bar. However, the order was reviewed due to an element of suppression, leading to the Additional Collector issuing the impugned order. The applicants contended that they had not added any profit element in the assessable value as they had incurred a net loss and believed the profit element referred to net profit, not gross profit. The department argued that the failure to show gross profit in the price list constituted a misstatement. The Tribunal noted that the suppression was not specifically alleged in the show cause notice and, following the Supreme Court's ruling in Collector of Customs v. Champlar India, found no mala fides on the applicants' part. Consequently, the Tribunal held that the applicants had a good case on merits and would face undue hardship if required to make the pre-deposit, thus ruling in favor of the applicants by dispensing with the pre-deposit requirement.

Regarding the interpretation of the Valuation Rules, the applicants had filed a price list without including the gross profit earned by them, believing that only net profit needed to be considered for assessable value calculation under Rule 6-B(ii). The department argued that the failure to disclose gross profit amounted to a misstatement. The Tribunal observed that the suppression was not explicitly alleged in the show cause notice and concluded that the applicants did not act with mala fides. Relying on the precedent set by the Supreme Court, the Tribunal held that the applicants had a strong case on merits and would suffer undue hardship if required to pre-deposit the duty amount, ultimately ruling in favor of the applicants.

The allegation of suppression stemmed from the applicants' failure to disclose the gross profit in the price list, which the department argued constituted a misstatement. The Tribunal noted that the show cause notice did not specifically allege suppression and that the failure to include gross profit could be implied as suppression. However, the Tribunal found no evidence of mala fides on the part of the applicants and, following the principles established by the Supreme Court, held that the applicants had a valid case on merits. Consequently, the Tribunal ruled in favor of the applicants, dispensing with the pre-deposit requirement and staying the recovery of the amount until the case's final disposal.