1994 (3) TMI 222 - AT - Central Excise

Summary

Issues Involved:
1. Whether freight administrative charges are additional consideration.
2. Whether these charges should be added to the price or assessable value.
3. Justification and quantum of penalty.

Summary:

1. Freight Administrative Charges as Additional Consideration:
The appellants, M/s. I.T.C. Ltd., were found to be collecting administrative charges on freight from their wholesale dealers through Debit Notes. The Department contended these charges were additional consideration, not part of transportation costs. The appellants argued these charges covered expenses related to transportation logistics and should be considered part of transportation cost. However, the Collector of Central Excise concluded that these charges were additional consideration and should be included in the assessable value u/s 4(1)(b) read with Rule 5 of the Valuation Rules, 1975.

2. Addition to Price or Assessable Value:
The appellants argued that if the charges were to be included, they should be added to the cum-duty price, not the assessable value. They cited the Tribunal's decision in the case of VST Industries, which held that additional consideration should be added to the wholesale price to arrive at the assessable value. The Tribunal in this case followed the same reasoning, rejecting the Department's reliance on the R. Gac Electrodes case, which did not interpret Rule 5 in detail. The Tribunal held that the freight administrative charges should be added to the price declared by the assessee for determining the normal price.

3. Justification and Quantum of Penalty:
The appellants contended that penalties under Rule 173Q and Rule 209 were not applicable as the goods were under physical control, and Rule 209 was not in force at the time of the alleged offense. The Tribunal agreed that Rule 209 could not be invoked for offenses before 30-1-1986 but upheld the penalty under Rule 9(2) due to non-disclosure of the freight administrative charges. The penalty was reduced from Rs. 50 lakhs to Rs. 15 lakhs, considering the appellants' partial compliance and voluntary payment during adjudication.

Separate Judgment by P.C. Jain, Member (T):
P.C. Jain partially dissented on the quantum of penalty, suggesting a maximum penalty of Rs. 1,10,000/- based on the interpretation that Rule 9(2) did not envisage a penalty for each removal but for the entire period of non-compliance.

Final Order:
The Tribunal concluded that the freight administrative charges were additional consideration and should be added to the price for determining the assessable value. The penalty was reduced to Rs. 15 lakhs, and the appeals were partly allowed.