1997 (12) TMI 197 - AT - Central Excise

Summary

Issues:
1. Assessable value determination based on contract price versus cost data.
2. Rejection of contract price by the department.
3. Bar on time for notice issuance.
4. Requirement of B2 bond.
5. Consideration of expenses incurred by the buyer in assessable value determination.

Assessable value determination based on contract price versus cost data:
The dispute arose from a price list filed by the respondent, declaring the value of TV sets at Rs. 4,900/- per set, attracting a concessional rate of duty. The department contended that the assessable value should include expenses incurred by the buyer for advertisement and sales promotion, which were not included by the respondent. The Assistant Collector approved the price list but directed the payment of differential duty and imposed a penalty based on discrepancies in cost data. The Collector (Appeals) held that the assessable value should be based on the contract price, as there was no evidence to reject it. However, the department challenged this decision, arguing that the assessable value should consider the expenses incurred by the buyer and discrepancies in cost data.

Rejection of contract price by the department:
The department contended that the contract price of Rs. 4,900/- per set did not reflect the actual value, as some component prices in the cost data provided were lower than the actual prices paid by the respondent. The Assistant Collector concluded that the assessable value should exceed Rs. 5,000/- per set if these discrepancies were rectified. The department argued that the contract price should not be accepted blindly, especially if it results in a lower duty payment than if the actual value exceeds Rs. 5,000/- per set.

Bar on time for notice issuance and requirement of B2 bond:
The Collector (Appeals) held that the notice issued by the department was time-barred and that the respondent had not been asked to furnish a B2 bond. These procedural aspects were raised as grounds for challenging the department's actions in determining the assessable value and imposing differential duty and penalty.

Consideration of expenses incurred by the buyer in assessable value determination:
The department sought to include expenses incurred by the buyer for advertisement, sales promotion, and sales incentives in the assessable value. However, the Tribunal held that such expenses should not be recovered as additional consideration from the buyer to the manufacturer, especially in a contract manufacturing scenario. The Tribunal emphasized that the manufacturer had the advantage of a supply contract, and therefore, the expenses incurred by the buyer should not impact the assessable value.

In conclusion, the Tribunal confirmed the decision of the Collector (Appeals) and dismissed the department's appeal, emphasizing the importance of considering the contract price, procedural requirements, and the nature of expenses in determining the assessable value for excise duty calculation.