2000 (5) TMI 228 - AT - Central Excise

Summary

Issues:
- Duty liability on value inclusive of free supply of pig iron
- Time-barred demand for duty payment
- Imposition of penalties and interest

Duty Liability on Value Inclusive of Free Supply of Pig Iron:
The appellants, manufacturers of C.I. Sleepers for the Indian Railways, charged buyers different prices based on whether pig iron was supplied free by the Railways. The impugned order held duty was payable on the value including the cost of free pig iron supply. The Commissioner found the appellants had suppressed the fact of receiving free pig iron, leading to duty demand confirmation. The appellants argued they paid duty at contracted prices without intent to evade payment. The Tribunal referred to the Supreme Court's decision in Burn Standard Co. Ltd. v. Union of India, ruling in favor of including the value of free supply items in assessable value. The Tribunal upheld the duty demand, emphasizing the appellants' suppression of material facts to evade duty payment.

Time-Barred Demand for Duty Payment:
The appellants contended the duty demand was time-barred, but the Tribunal disagreed. The appellants failed to disclose the receipt of free pig iron supplies to the Revenue authorities and provided a false certificate stating no additional consideration in the transaction. Consequently, the Tribunal held the appellants suppressed material facts with intent to evade duty payment, falling under the proviso to Section 11A of the Central Excise Act.

Imposition of Penalties and Interest:
The Tribunal found the penalty imposed under Section 11AC was illegal as it was introduced in 1996, while the duty demand period was in 1994. Therefore, the penalty under Section 11AC was set aside. However, the penalty of Rs. 5,000 under Rule 173Q of the Central Excise Rules was confirmed. The demand for interest was also deemed legally unsustainable as the relevant provision came into force in 1995. Consequently, the Tribunal set aside the interest demand. The duty demand and the penalty of Rs. 5,000 were confirmed, partially allowing the appeal in terms of penalty under Section 11AC and the interest demand.

This judgment highlights the importance of disclosing all relevant information to tax authorities, the inclusion of free supply items in assessable value, and the legal implications of suppressing material facts in duty payment matters.