1996 (11) TMI 216 - AT - Central Excise

Issues Involved:

1. Inclusion of heat fusion charges in the assessable value.
2. Legitimacy of the lease agreement between M/s. LL and M/s. Engg. Services.
3. Allegations of suppression of facts and intention to evade duty.
4. Applicability of the extended period of limitation for duty demand.

Issue-wise Detailed Analysis:

1. Inclusion of Heat Fusion Charges in the Assessable Value:

The primary issue was whether the heat fusion charges incurred by M/s. Engg. Services should be included in the assessable value of the goods for payment of duty. The department argued that M/s. LL should have performed the job of heat fusion and slitting instead of outsourcing it to M/s. Engg. Services, and thus the labour conversion charges and process costs collected from distributors should be subject to duty. The appellant contended that once the goods were sent to M/s. Engg. Services, they were considered delivered from the factory, and the job work charges paid to M/s. Engg. Services were not includible in the assessable value as the job work was done per the customers' instructions.

2. Legitimacy of the Lease Agreement:

The department questioned the genuineness of the lease agreement between M/s. LL and M/s. Engg. Services, suggesting it was a device to insulate heat fusion charges from excise duty. The appellant argued that the lease agreement was legitimate and conducted on a principal-to-principal basis. The tribunal found that the lease agreement, including various amendments, indicated a legitimate business transaction where M/s. Engg. Services paid service charges for using the factory premises and machinery. The tribunal concluded that M/s. Engg. Services was an independent entity performing job work and was not a dummy of the appellant.

3. Allegations of Suppression of Facts and Intention to Evade Duty:

The department alleged that M/s. LL suppressed the assessable value of the goods and did not include service charges collected from M/s. Engg. Services to evade duty. The appellant maintained that all relevant facts, including the lease agreement, were disclosed to the jurisdictional central excise officers, and there was no suppression of facts. The tribunal agreed with the appellant, noting that the agreements were made known to the department, and there was no evidence of willful suppression or intent to evade duty.

4. Applicability of the Extended Period of Limitation:

The department invoked the extended period of limitation, arguing that the appellant's actions justified it. The appellant contended that since all facts were disclosed, the extended period could not be invoked. The tribunal held that the facts were indeed disclosed to the departmental officers, and any inferences regarding the nature of the transactions should have been drawn by the officers at the relevant time. Thus, the demand was barred by limitation as the SCN was issued beyond the six-month period.

Conclusion:

The tribunal allowed the appeals, setting aside the demand for duty and penalties imposed on the appellants. It concluded that the heat fusion charges were not includible in the assessable value, the lease agreement was legitimate, there was no suppression of facts, and the extended period of limitation was not applicable.

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