1997 (1) TMI 173 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of the price of cylinders in the assessable value of finished products.
2. Addition of notional interest on advances received from customers.
3. Bar of limitation in issuing the show cause notice.

Summary:

1. Inclusion of the price of cylinders in the assessable value of finished products:
The main contention in the appeals was whether a part of the price collected for cylinders should be included in the assessable value of the finished product. The appellant manufactures printed polyester films using custom-made cylinders, which are retained for future use. The lower authorities added the entire cost of the cylinders to the value of the printed pouches manufactured during the relevant period. However, the Tribunal held that the cost of the cylinders should be proportionately added to the value of the printed pouches based on the expected life and capability of the cylinders. This principle is supported by the Board's clarification regarding the apportionment of the cost of patterns in the foundry industry. The Tribunal set aside the lower authorities' conclusion and remanded the matter for fresh consideration by the adjudicating authorities.

2. Addition of notional interest on advances received from customers:
The appellant collected a part of the price of the cylinders in advance as security, which was a recognized trade practice. The lower authorities added notional interest on these advances to the assessable value of the printed pouches. The Tribunal referred to the Supreme Court's decision in Metal Box India Ltd. v. Collector of Central Excise, where advances free of interest were considered in fixing the price. However, in the present case, the advances were proportionately collected from all buyers and retained for a short period. The Department did not provide evidence that the advances affected the price charged. The Tribunal set aside the lower authorities' finding on this aspect.

3. Bar of limitation in issuing the show cause notice:
The show cause notice dated 1-10-1992 covered the period from September 1987 to March 1992, invoking the larger period of limitation u/s 11A of the Central Excises Act, 1944, on the ground of suppression of material facts. The appellant argued that there was full disclosure through various documents. However, the Tribunal found that the documents cited were submitted after the show cause notice and did not establish prior disclosure to the proper officer. The Tribunal agreed with the Department that there was suppression of material facts with intent to evade duty and upheld the invocation of the larger period of limitation.

Conclusion:
The Tribunal set aside the confirmation of demand of differential duty and penalty imposed by the lower authorities. The case was remanded to the jurisdictional authority for fresh consideration of the apportionment of the cost of cylinders and quantification of penalty amount, with an opportunity for the appellant to be heard. The appeal was allowed as indicated.