1996 (9) TMI 333 - AT - Central Excise

Summary

Issues Involved:

1. Inclusion of extra amounts collected for special folding, wrapping, packing, and DA commission charges in the assessable value.
2. Timeliness of the show cause notice.
3. Errors in calculation of the demanded duty.
4. Justification and quantum of the penalty imposed.

Issue-wise Detailed Analysis:

1. Inclusion of Extra Amounts in Assessable Value:

The appellant, engaged in the manufacture of cotton and manmade fabrics, was found to have issued debit notes for extra amounts collected from certain customers for specific fabric varieties under the guise of banking charges, extra stamping, folding, and packing charges. These extra amounts were not reflected in the statutory records like price lists, classification lists, and RT 12 returns. The investigation revealed that these amounts, if included, would move the value of the fabrics to a higher slab, attracting a higher duty rate. The appellant argued that these charges were for special services requested by buyers and were not part of the normal price. However, the tribunal found that the extra amounts were collected in secrecy, indicated by secret codes in contracts (Kabalas), and there was no evidence of extra work done. Thus, these amounts were deemed part of the sale price and included in the assessable value under Section 4 of the Act.

2. Timeliness of the Show Cause Notice:

The show cause notice was issued on 21-11-1986 for the period 1982-85, beyond the standard six months but within five years. The tribunal upheld the Collector's invocation of the proviso to Section 11A of the Act due to the appellant's fraud, deliberate suppression of facts, and misdeclaration. The appellant's argument that full facts were disclosed in their accounts and balance sheets, periodically audited by excise officers, was rejected. The tribunal emphasized that the crucial documents (Kabalas and IBM statements) indicating the evasion were not mandatorily furnished to the excise department, establishing the appellant's intent to evade duty. Hence, the notice was deemed within time.

3. Errors in Calculation:

The annexure to the show cause notice detailed the extra amounts collected and the differential duty for each year. The appellant objected to certain amounts, claiming calculation errors. The Collector corrected some amounts but confirmed the demand for Rs. 34,18,289.90. The tribunal reviewed the Collector's findings and found no factual errors or calculation mistakes. Therefore, the contention regarding calculation errors was rejected.

4. Justification and Quantum of Penalty:

The appellant contended that the penalty under Rule 173Q was unjustified and excessive. The tribunal confirmed the violation of Rule 9(1) and (2) and noted that the addition of extra amounts led to differential duty liability. The appellant argued that the provisions for penalties were not applicable to additional duties at the relevant time. However, the tribunal considered the confirmed demand of basic excise duty, which was around 63% of the total duty, and reduced the penalty from Rs. 5 lakhs to Rs. 3 lakhs, taking into account all circumstances.

Conclusion:

The tribunal confirmed the inclusion of extra amounts in the assessable value, upheld the timeliness of the show cause notice, found no calculation errors, and reduced the penalty to Rs. 3 lakhs. The appeal was disposed of accordingly.