1995 (8) TMI 119 - AT - Central Excise

Issues Involved:
1. Whether the mounting charges were part of the price and whether such charges were excludible from the price under Notification No. 120/75-C.E.
2. Whether the demand for duty was time-barred.

Detailed Analysis:

Issue 1: Inclusion of Mounting Charges in the Price

1. Collector's Findings:
- The Collector confirmed the demand for duty amounting to Rs. 3,47,961.84 under Rule 9(2) of the Central Excise Rules, 1944, read with Section 11A(1) of the Central Excises and Salt Act, 1944.
- The Collector held that NEI was liable for penal action under Rule 173Q and imposed penalties of Rs. 10,000 and Rs. 500 under Rules 173Q and 226, respectively.
- The order was issued without prejudice to any other actions that might be initiated against NEI.

2. Appellants' Arguments:
- The appellants argued that the mounting charges were optional and not part of the sale price of axle boxes.
- They contended that mounting charges were in the nature of after-sale service charges and should not form part of the assessable value under Section 4 of the Central Excises and Salt Act, 1944.
- They cited the Hon. Supreme Court's judgment in the case of Kelvinator of India Ltd., which supported their claim that service charges incurred after clearance of goods would not form part of the assessable value.

3. Respondent's Arguments:
- The respondent argued that the contract indicated a composite price of Rs. 3,200, which included mounting charges.
- The respondent contended that the mounting charges were part and parcel of the total price and should have been included in the invoice submitted to the department.
- They argued that the Notification No. 120/75-C.E. exempts goods cleared from the factory on sale from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the invoice price, excluding duty and local taxes.

4. Tribunal's Findings:
- The Tribunal noted that the contract clearly showed a breakdown of the price, including Rs. 40 as mounting charges.
- The Tribunal held that Rs. 40 collected as mounting charges were part of the composite price and should be included in the invoice value.
- The Tribunal distinguished the facts of the present case from the Supreme Court's decision in Texmaco Ltd., ruling that the mounting charges should be included in the assessable value.

Issue 2: Time-Barred Demand

1. Appellants' Arguments:
- The appellants argued that the demand was time-barred as the show cause notice was issued on 4-7-1988 for the period 1-4-1983 to 28-2-1986.
- They contended that there was no concealment or misdeclaration, and the contract was submitted to the department along with the price lists for roller bearings from 1960.

2. Respondent's Arguments:
- The respondent argued that the issue of collecting mounting charges came to the notice of the excise authorities only in November 1985.
- They contended that the appellants intentionally held back this information with the intention to evade payment of duty.

3. Tribunal's Findings:
- The Tribunal found that the appellants did not disclose the fact of collecting Rs. 40 as mounting charges to the department.
- The Tribunal held that the invocation of proviso (1) of Section 11A of the Central Excises and Salt Act was justified, and the demand was not time-barred.

Separate Judgment by Member (T):

1. Member (T)'s Findings:
- The Member (T) disagreed with the majority opinion and held that mounting charges were in the nature of post-sale services and should not be included in the assessable value.
- He argued that Notification No. 120/75-C.E. was intended to mitigate the hardship on the manufacturer by exempting them from payment of duty in excess of the duty calculated on the basis of the invoice price.
- He concluded that requiring the inclusion of mounting charges in the assessable value would defeat the purpose of the exemption and impose a greater burden on the manufacturer.

2. Final Decision:
- The Member (T) set aside the impugned order and allowed the appeal, holding that mounting charges should not form part of the assessable value.

Conclusion:
The majority opinion held that mounting charges should be included in the assessable value and the demand was not time-barred, leading to the rejection of the appeals. However, the dissenting opinion by Member (T) argued that mounting charges were post-sale services and should not be included in the assessable value, thereby allowing the appeal.

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