1998 (5) TMI 233 - AT - Central Excise

Summary

Issues:
1. Application of different price lists for captive consumption and sale to outside parties.
2. Allegations of duty evasion and imposition of penalty.
3. Interpretation of Central Excise Valuation Rules.
4. Bar of limitation for issuing show cause notice.

Analysis:

Issue 1: Application of different price lists for captive consumption and sale to outside parties
The case involved M/s. Jay Engineering Works manufacturing sewing machines and related products. The Department alleged that the appellants cleared goods for sale to outside parties at prices approved for captive consumption, leading to duty evasion. The appellants argued that only a small percentage of goods were sold at approved prices for captive consumption, and the duty was paid accordingly for goods consumed captively. The Tribunal agreed that duty should be demanded only on goods sold at approved captive consumption prices, setting aside the impugned order and remanding for recalculation.

Issue 2: Allegations of duty evasion and imposition of penalty
The Department alleged duty evasion by the appellants for clearing goods at prices meant for captive consumption but sold to outside parties. The Collector confirmed the duty demand and imposed a personal penalty. The appellants argued that the show cause notice issued in 1991 for the period 1986-87 was time-barred, as all facts were known to the Department. However, the Tribunal upheld the duty demand on goods sold at captive consumption prices and rejected the plea for limitation, citing malpractices by the appellants.

Issue 3: Interpretation of Central Excise Valuation Rules
The Department contended that duty should be paid at prices approved for sale to outside parties, even if goods were cleared at captive consumption prices. The Tribunal clarified that duty must be paid based on the approved price list for the actual nature of the transaction. The legal provisions under Rule 6B(ii) of Central Excise Valuation Rules were considered, emphasizing the importance of applying the correct valuation rules for goods consumed captively.

Issue 4: Bar of limitation for issuing show cause notice
The appellants argued that the show cause notice issued in 1991 for the period 1986-87 was time-barred due to the Department's knowledge of all relevant facts. However, the Tribunal found no merit in this plea, stating that the allegations of diversion of captive consumption goods for sale to outside parties invoked a larger period for scrutiny. The Tribunal upheld the invocation of the larger period by the Collector, dismissing the plea for limitation.

In conclusion, the Tribunal ruled in favor of the appellants regarding the application of different price lists and duty calculation, while upholding the duty demand for goods sold at captive consumption prices and rejecting the plea for limitation based on the Department's knowledge of alleged malpractices.