1994 (2) TMI 170 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of undervaluation of dutiable compressors and overvaluation of non-dutiable parts.
2. Applicability of the extended period of limitation under Section 11A of the Central Excises & Salt Act, 1944.
3. Validity of the show cause notice and the approval of price lists.
4. Calculation of differential duty and penalty imposed.
5. Allegations of suppression and misstatement of facts.

Issue-wise Detailed Analysis:

1. Allegation of Undervaluation and Overvaluation:
The appellants were engaged in manufacturing compressors and were accused of undervaluing dutiable compressors while overvaluing non-dutiable parts, which were essential for the compressors' functioning. The investigation revealed that the appellants issued two invoices-one for the dutiable compressors and another for the non-dutiable parts. It was found that the compressors were sold at 20-30% of their cost price, and the parts were sold at about 300% more than their cost price. The Tribunal concluded that this was a deliberate strategy to evade Central Excise duty on compressors while recovering the differential cost through the sale of overpriced non-dutiable parts.

2. Applicability of Extended Period of Limitation:
The appellants contended that the show cause notice was time-barred and that there was no suppression of facts. However, the Tribunal found that the show cause notice dated 17-11-1987 was issued within the extended period of limitation under Section 11A of the Act, as the appellants had intentionally suppressed facts to evade duty. The Tribunal cited precedents to support the use of the extended period in cases of fraud, wilful misstatement, or suppression of facts.

3. Validity of Show Cause Notice and Approval of Price Lists:
The appellants argued that the approval of their price lists by the Central Excise department should prevent the issuance of a show cause notice. The Tribunal, however, held that the approval of price lists does not preclude the department from issuing a show cause notice if new facts come to light, indicating suppression or misstatement. The Tribunal referenced the Gujarat High Court's decision in Alembic Glass Industries v. Union of India, which allowed reopening price lists under Section 11A for short levy or non-levy of duty.

4. Calculation of Differential Duty and Penalty Imposed:
The Collector of Central Excise confirmed a demand of Rs. 1,55,22,150.60 as differential duty and imposed a penalty of Rs. 40 lakhs on the appellants. The Tribunal reviewed the cost calculations, which were based on the information provided by the appellants and found them to be accurate. The Tribunal reduced the penalty from Rs. 40 lakhs to Rs. 20 lakhs, considering the totality of circumstances.

5. Allegations of Suppression and Misstatement of Facts:
The show cause notice detailed that the appellants had intentionally declared lower prices for compressors and higher prices for parts to evade duty. The Tribunal found that the appellants' actions constituted deliberate suppression and misstatement of facts. The Tribunal cited the Supreme Court's decision in Jaishri Engineering Company Pvt. Ltd. v. C.C.E., which held that deliberate suppression or misstatement justifies the imposition of penalty and the extended period of limitation.

Conclusion:
The Tribunal upheld the demand for differential duty and the imposition of a reduced penalty. It confirmed that the appellants had engaged in undervaluation of dutiable compressors and overvaluation of non-dutiable parts to evade Central Excise duty. The Tribunal also upheld the applicability of the extended period of limitation and the validity of the show cause notice, rejecting the appellants' arguments regarding the approval of price lists and the alleged time-bar. The appeal was otherwise rejected, and the impugned order was confirmed.