1998 (10) TMI 299 - AT - Central Excise

Summary

Issues Involved:

1. Demand of differential Central Excise duty.
2. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.
3. Confiscation of land, building, plant, and machinery.
4. Inclusion of income from investments in the assessable value of motorcycles.
5. Alleged suppression of material facts and extended period of limitation.

Issue-wise Detailed Analysis:

1. Demand of Differential Central Excise Duty:

The Commissioner of Central Excise, New Delhi, confirmed a demand of differential Central Excise duty amounting to Rs. 2,07,33,501.35 for the period June 1986 to January 1991. The Commissioner found that the additional consideration accrued to the appellant on account of booking advances influenced profitability and pricing decisions. The amount of additional consideration was not declared in the price lists, leading to a demand for differential duty.

2. Imposition of Penalty under Rule 173Q:

A penalty of Rs. 50 lakhs was imposed under Rule 173Q of the Central Excise Rules, 1944. The Commissioner found deliberate misdeclaration of prices in the price lists and suppression of material facts, justifying the imposition of the penalty.

3. Confiscation of Land, Building, Plant, and Machinery:

The Commissioner dropped the proposed action for confiscation of land, building, plant, and machinery belonging to the appellant, M/s. Hero Honda Motors Ltd. (HHML).

4. Inclusion of Income from Investments in the Assessable Value:

The Commissioner included the income from investments made out of the booking advances in the assessable value of motorcycles. It was found that the income from such investments formed part of the total considerations for the sale of motorcycles. The additional consideration accrued from booking advances and the income therefrom influenced the selling price, resulting in a lower price at the factory gate.

The appellant contested this inclusion, arguing that the income from investments was not related to the manufacture and sale of motorcycles. They contended that the prices were fixed based on market conditions and competitor pricing, not influenced by the booking advances. The Tribunal found that the income from investments helped reduce losses but did not directly influence the sale prices. Thus, the inclusion of such income in the assessable value was not justified.

5. Alleged Suppression of Material Facts and Extended Period of Limitation:

The Commissioner alleged suppression of material facts with intent to evade duty, invoking the extended period of limitation under the proviso to Section 11A of the Central Excise Act. The appellant argued that there was no suppression, as they had informed the department about the receipt of deposits from customers. The Tribunal found that the primary information about the receipt of deposits was disclosed to the department, and the extended period of limitation was not applicable. The demand was also found to be time-barred.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal, concluding that the inclusion of income from investments in the assessable value was not justified, and the extended period of limitation was not applicable due to the lack of suppression of material facts.