2006 (7) TMI 60 - AT - Central Excise

Central Excise - Valuation - Appellant charge penalty for not providing all the material fact under section 11AC and under rule 173Q- Apex court setting aside all the penalties imposed on assessees.

Summary

Issues:
1. Inclusion of loading charges and remuneration in the assessable value of goods
2. Imposition of penalty under Section 11AC of the Central Excise Act
3. Denial of input-duty credit and capital goods credit

Analysis:

Issue 1: Inclusion of loading charges and remuneration in the assessable value of goods
The case involved disputes regarding the inclusion of loading charges and remuneration in the assessable value of detergents supplied by the assessee to Hindustan Lever Ltd. The loading charges, although borne by the buyer, were considered includible in the assessable value as they were incurred in connection with loading at the assessee's factory. Additionally, the remuneration received by HLL's employees for quality control activities was deemed integral to enhancing the value of the goods. The appellate tribunal upheld the lower authorities' valuation and duty demand, citing precedents supporting the inclusion of such expenses in the assessable value.

Issue 2: Imposition of penalty under Section 11AC of the Central Excise Act
The assessee challenged the penalty imposed under Section 11AC, arguing against the reasonableness of the penalty amount. The tribunal noted that the penalty equal to the duty demanded for the period post-28-9-96 was sustained, but the residuary penalty under Section 11AC was vacated. The tribunal considered the payment of the entire duty prior to the show-cause notice issuance and held that no penalty was imposable under Section 11AC in such circumstances, in line with apex court decisions and tribunal precedents.

Issue 3: Denial of input-duty credit and capital goods credit
The denial of input-duty credit and capital goods credit by the lower authorities was a subject of contention. The appellate tribunal allowed the input-duty credit but upheld the denial of capital goods credit, noting that the assessee had not contested its disallowance. The penalty imposed under Rule 173Q was reduced from Rs. 1 lakh to Rs. 50,000, considering the reversal of the entire capital goods credit by the assessee before the show-cause notice. Consequently, the tribunal set aside the penalties imposed by the lower appellate authority, ruling in favor of the assessee on this issue.

In conclusion, the appellate tribunal dismissed the Revenue's appeal, upheld the inclusion of loading charges and remuneration in the assessable value of goods, vacated the residuary penalty under Section 11AC, allowed input-duty credit, and reduced the penalty under Rule 173Q.