1998 (2) TMI 241 - AT - Central Excise

Summary

Issues:
1. Duty payment on differential price escalation in a manufacturing contract.
2. Dispute over the assessable value due to the escalation clause and debit note.
3. Time-barred show cause notice for duty demand.

Issue 1: Duty payment on differential price escalation in a manufacturing contract:
The case involved an appellant, an undertaking of the Himachal Pradesh Government, engaged in manufacturing pre-stressed concrete poles for the Himachal Pradesh State Electricity Board under a contract. The appellant paid duty based on the price in the contract but issued a debit note for the increased price of raw materials due to an escalation clause. A show cause notice was issued alleging deliberate concealment and duty evasion. The appellant argued that duty was paid only after realizing the differential price, known to the Department, and there was no intent to evade duty. The Addl. Collector upheld the demand, leading to the manufacturer's appeal.

Issue 2: Dispute over the assessable value due to the escalation clause and debit note:
The contract included an escalation clause for raw material price increases, leading to the issuance of a debit note by the appellant. The buyer did not accept or pay the increased amount. Referring to a previous case, the Tribunal highlighted that raising a debit note might indicate the amount as part of the price unless objected to by the buyer. As the appellant did not claim buyer objection or error in the note, the amount covered by the note should be part of the assessable value. Non-payment by the buyer does not exclude the unpaid amount from the assessable value, making it the duty of the manufacturer to pay duty and recover unpaid amounts.

Issue 3: Time-barred show cause notice for duty demand:
The appellant argued the show cause notice was time-barred for the period in question, citing communications to the jurisdictional Superintendent regarding the escalation clause and non-payment by buyers. However, the appellant did not specifically deny the concealment or issue of the debit note at the relevant time. Following a precedent, the Tribunal held that in cases with price variation clauses, prices agreed upon are provisional, and limitation provisions do not apply. Thus, the show cause notice was deemed not time-barred, leading to the dismissal of the appeal.

Overall, the Tribunal dismissed the appeal, upholding the duty demand based on the escalation clause and the assessable value, while ruling the show cause notice as not time-barred.