1996 (7) TMI 390 - AT - Central Excise

Issues Involved:
1. Assessable value of TV sets.
2. Alleged under-valuation and shadow market.
3. Relationship between appellants and NELCO.
4. Invocation of the proviso to Section 11A of the Central Excises and Salt Act, 1944.
5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.
6. Deduction of duty and tax element from the assessable value.

Issue-wise Detailed Analysis:

1. Assessable Value of TV Sets:
The appellants were selling Colour TV sets to NELCO and later to six other concerns at lower prices, which in turn sold the sets to NELCO at a profit. The Collector determined that the prices charged by NELCO to their customers should be the assessable value, treating them as cum-duty prices of the appellants. The Tribunal directed that the assessable value should be based on the prices paid by NELCO to the intermediaries, with deductions for sales tax and excise duty.

2. Alleged Under-valuation and Shadow Market:
The show cause notice alleged that the appellants created a shadow market by selling TV sets to six concerns at lower prices, which then sold to NELCO at higher prices. The Tribunal found that the transactions with these concerns were paper transactions to lower the duty burden, and the sales were actually made directly to NELCO.

3. Relationship Between Appellants and NELCO:
The Collector concluded that the appellants were "hired manufacturers" for NELCO and not the owners of the TV sets, based on the provision of technical knowhow and assistance by NELCO without fees. The Tribunal disagreed, stating that the transactions were on a principal-to-principal basis and at arm's length, and there was no special relationship or suppression of facts by the appellants.

4. Invocation of the Proviso to Section 11A:
The show cause notice alleged wilful suppression of facts and deliberate design to evade duty. The Tribunal upheld the invocation of the extended period of limitation under the proviso to Section 11A, as the facts proved deliberate under-valuation and creation of paper transactions.

5. Imposition of Penalty Under Rule 173Q:
The Collector imposed a penalty of Rs. 2 lakhs for suppressing relevant information and filing misleading price lists. The Tribunal agreed that the case warranted a penalty but directed that the penalty be quantified afresh after determining the differential duty.

6. Deduction of Duty and Tax Element from the Assessable Value:
The department appealed against the deduction of duty and tax elements from the assessable value. The Tribunal upheld the Collector's direction to deduct these elements, in accordance with Section 4(4)(d)(ii) of the Act.

Final Judgment:
The Tribunal set aside the impugned order, directed the assessable value to be based on the prices paid by NELCO to the intermediaries, with deductions for sales tax and excise duty. The differential duty and penalty were to be determined afresh by the Commissioner. The appeals filed by the department were dismissed, and the appeal by the manufacturer was allowed.

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