1997 (8) TMI 229 - AT - Central Excise

Issues Involved:

1. Allegation of excess freight/transport expenses realization.
2. Determination of assessable value for excise duty.
3. Applicability of penalty under Rule 173Q.
4. Consideration of depreciation, maintenance, and other expenses.
5. Liability of duty on chlorine.
6. Time-barred demand of duty.

Issue-wise Detailed Analysis:

1. Allegation of Excess Freight/Transport Expenses Realization:

The appellant, a manufacturer of caustic soda and hydrochloric acid, was alleged by the Revenue to have realized an additional amount from its buyers under the garb of freight/transport expenses in excess of actual expenses incurred. The quantified amount was Rs. 51,20,484.00 for the period 1984-85 to 1989-90. The adjudicating authority directed the appellant to pay differential duty on the revised assessable value, which included the additional amount realized, excluding the cost of transportation from the place of removal to the place of delivery and the cost of insurance on the freight.

2. Determination of Assessable Value for Excise Duty:

The appellant contended that profits made on ancillary ventures like transportation should not affect the assessable value of the goods. The appellant argued that the price at the factory gate was ascertainable and that any excess collection should be offset by lesser collections in other years. However, the Tribunal noted that each sale involved negotiation and a separate contract, making it impossible to ascertain a standard factory gate price. The Tribunal held that only actual transportation expenses should be deducted from the composite price charged, and any excess realization should be included in the assessable value.

3. Applicability of Penalty under Rule 173Q:

The adjudicating authority imposed a penalty of Rs. 1,00,000/- on the appellant under Rule 173Q. The Tribunal upheld this penalty, stating that the appellant's suppression of the transportation contract and the separate billing for transportation expenses indicated an element of mens rea, justifying the penalty and the invocation of the larger period of limitation of five years.

4. Consideration of Depreciation, Maintenance, and Other Expenses:

The appellant argued that expenses related to the depreciation, maintenance, and repairs of rubber-lined tankers, as well as salaries and wages of employees engaged in transportation, should be excluded from the assessable value. The Tribunal rejected this argument, stating that tankers are specialized vehicles for transportation and not durable and returnable packing. Therefore, all expenses incurred up to the delivery of goods are liable to be included in the assessable value.

5. Liability of Duty on Chlorine:

The appellant submitted that chlorine was liable to duty at a specific rate and not ad valorem, thus there was no scope for realizing duty on excess collection for transportation. The Tribunal agreed with this submission and directed the adjudicating authority to provide relief to the appellant for the period during which chlorine was liable to a specific rate of duty.

6. Time-barred Demand of Duty:

The appellant argued that the demand of duty was barred by time, as all contracts were brought to the department's notice, and there was no motive in suppressing the same. The Tribunal held that any demand for a period prior to 26-3-1985 was time-barred and set aside such demands.

Conclusion:

The Tribunal rejected the appeal except for two points: (i) relief in respect of chlorine for the period it was liable to specific duty, and (ii) setting aside the demand of duty beyond five years. The Tribunal upheld the inclusion of excess transportation charges in the assessable value and the imposition of penalty, emphasizing the appellant's duty to disclose the transportation contracts to the department.

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