1998 (8) TMI 311 - AT - Central Excise

Summary

Issues Involved:
1. Whether MICO is the real manufacturer of Filter Inserts.
2. Whether the appellants, including MICO, committed contravention of Central Excise Rules and undervaluation.
3. Whether the extended period of limitation u/s 11A of the Central Excise Act, 1944 is applicable.
4. Whether penalties imposed were justified.

Summary:

1. MICO as the Real Manufacturer:
The Commissioner held that MICO are the real manufacturers of Filter Inserts produced by various appellants, confirming a duty liability of Rs. 3,10,73,971.52 on MICO. It was alleged that MICO controlled the manufacturing process and prices of the filter inserts produced by other appellants, thus acting as the real manufacturer.

2. Contravention and Undervaluation:
The Department alleged contravention of Rules 9, 173F, 174 of the Central Excise Rules, 1944, and undervaluation of goods. It was argued that the goods were sold at transfer prices, not reflecting the normal price u/s 4 of the Central Excises & Salt Act, 1944, leading to evasion of duty. The Commissioner supported these allegations, stating that MICO fixed the prices, indicating control over the ancillary units.

3. Extended Period of Limitation:
The Commissioner invoked the extended period of limitation u/s 11A of the Central Excise Act, 1944, citing suppression of facts by MICO. It was argued that MICO's actions were deliberate and aimed at evading duty, justifying the extended period.

4. Penalties:
Penalties were imposed under Rule 173Q(1) of the Central Excise Rules, 1944, with Rs. 30 lakhs on MICO and Rs. 1,00,000/- on each of the other appellants. The Commissioner justified the penalties based on the findings of contravention and evasion of duty.

Tribunal's Findings:
The Tribunal found that the appellants, including MICO, were independent manufacturers with their own licenses, and there was no evidence of dummy units or flow back of profits to MICO. The Tribunal relied on previous judgments, including those of the Karnataka High Court and the Tribunal itself, which had ruled in favor of the appellants. The Tribunal concluded that the transactions were on a principal-to-principal basis, and the price negotiations were independent and mutually agreed upon. The Tribunal set aside the impugned order, allowing the appeals and rejecting the Department's allegations of MICO being the real manufacturer, contravention of rules, undervaluation, and the applicability of the extended period of limitation.