1997 (2) TMI 306 - AT - Central Excise

Issues Involved:
1. Evasion of duty through under-declaration of value.
2. Duty demand on royalty amounts collected from dealers.
3. Evidence of fabrication work and use of brand name.
4. Apportionment of extra realization towards prime material and waste.
5. Rate of duty applicable on extra realization.
6. Penalty imposed on the firm and its directors.
7. Redemption fine on plant and machinery.

Detailed Analysis:

1. Evasion of Duty through Under-Declaration of Value:
The department's case was based on income tax investigations revealing that the appellant under-declared the value of Polyurethane Foam for assessment purposes, leading to a duty demand of Rs. 11,87,825.95. The appellant did not contest the amounts derived from these investigations, and the duty demanded was confirmed.

2. Duty Demand on Royalty Amounts Collected from Dealers:
The appellant collected royalty from dealers as per an agreement, claiming it was for the use of the brand name "JOY FOAM." The lower authority relied on dealer statements to impose duty on these amounts. The appellant argued that the royalty was known to the department, and therefore, no suppression of facts occurred, making the extended limitation period inapplicable. The tribunal found that the royalty agreement was acted upon and not a cover for extra realization, as evidenced by cross-examinations of dealers.

3. Evidence of Fabrication Work and Use of Brand Name:
The tribunal examined cross-examinations of dealers, particularly Shri K.M. Mathew and Shri Abdul Jawad, who confirmed using the brand name and performing fabrication work. The tribunal concluded that the appellant's dealers were indeed using the brand name and conducting fabrication, thus validating the royalty agreement. The department's lack of additional evidence to the contrary led the tribunal to give the benefit of doubt to the appellant.

4. Apportionment of Extra Realization Towards Prime Material and Waste:
The appellant argued that extra realizations should be attributed to both prime materials (mattresses) and waste/scrap. The tribunal accepted this plea, directing the lower authority to quantify the extra realization on a pro rata basis using statutory records.

5. Rate of Duty Applicable on Extra Realization:
The appellant requested that the duty on extra realizations be based on the rates applicable in the respective years. The tribunal agreed, noting that duty should be charged at the highest rate applicable in each year.

6. Penalty Imposed on the Firm and Its Directors:
The tribunal reduced the penalty on M/s. Joy Foam Pvt. Ltd. from Rs. 1,20,000/- to Rs. 30,000/-, considering the revised duty demand. The penalties on the directors were also reduced: Shri Cherian's penalty was reduced to Rs. 15,000/- and Shri Verghese's to Rs. 5,000/-.

7. Redemption Fine on Plant and Machinery:
The tribunal reduced the redemption fine on the confiscated plant and machinery from Rs. 20,000/- to Rs. 10,000/-.

Conclusion:
The appeals were allowed with consequential reliefs, including reduced penalties and fines, and directions for recalculating duty based on the tribunal's findings.

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