1999 (6) TMI 300 - AT - Central Excise

Summary

Issues Involved:
1. Alleged under-valuation and evasion of Central Excise duty.
2. Inclusion of advertisement expenses in the assessable value.
3. Inclusion of notional interest on interest-free deposit in the assessable value.
4. Sale of 'X' grade products as prime quality.
5. Penalty imposition on the appellant company and its Managing Director.
6. Applicability of the extended period of limitation.

Detailed Analysis:

1. Alleged Under-valuation and Evasion of Central Excise Duty:
The Commissioner of Central Excise, Shillong, dropped the demand of Rs. 18,47,91,347.00 for alleged under-valuation, holding that the ex-factory price declared by the appellant and approved by the Revenue was not artificial. The Commissioner relied on the Supreme Court's judgment in Indian Oxygen Ltd., which stated that once the factory gate price is ascertainable, all assessments should be made at that price. The Tribunal upheld this finding, noting that the Department had not provided sufficient documentary evidence to prove that the ex-factory price was artificially low.

2. Inclusion of Advertisement Expenses in the Assessable Value:
The Commissioner upheld the inclusion of advertisement expenses incurred by M/s. Landle in the assessable value, confirming a demand of Rs. 7,05,95,368.00. However, Member (Judicial) disagreed, noting that the factory gate price had been accepted for other sales and should apply to sales to M/s. Landle as well. Member (Judicial) referenced the Supreme Court's decision in Philips India Ltd., which held that advertisement expenses incurred by dealers should not be added to the assessable value. The third member, agreeing with Member (Judicial), set aside the demand, emphasizing that the advertisement expenses benefitted both the manufacturer and the dealer.

3. Inclusion of Notional Interest on Interest-free Deposit in the Assessable Value:
The Commissioner confirmed a demand of Rs. 48,48,500.00 on this account. Member (Technical) reduced this to Rs. 43,43,500.00, the amount shown in the show cause notice. Member (Judicial) disagreed, holding that the interest-free deposit did not influence the sale price to M/s. Landle and that the Supreme Court's decision in Metal Box India Ltd. did not apply. The third member agreed with Member (Judicial), setting aside the demand entirely.

4. Sale of 'X' Grade Products as Prime Quality:
The Commissioner confirmed a demand of Rs. 58,96,580.00 for selling 'X' grade goods as prime quality from seven depots. Member (Technical) upheld this finding, noting that the appellant did not deny the mixing of 'X' grade and prime quality goods at these depots. Member (Judicial) agreed with this view, confirming the demand.

5. Penalty Imposition:
The Commissioner imposed a penalty of Rs. 1 crore on the appellant company and Rs. 1 lakh on its Managing Director. Member (Technical) upheld these penalties, citing the devious method adopted to evade duty. Member (Judicial) reduced the penalty on the company to Rs. 10 lakhs and set aside the penalty on the Managing Director, noting no evidence of his active involvement. The third member agreed with Member (Judicial), reducing the penalty on the company and setting aside the penalty on the Managing Director.

6. Applicability of the Extended Period of Limitation:
Member (Judicial) held that the extended period of limitation was not available for the allegations related to advertisement expenses and interest on deposits, referencing earlier proceedings and the High Court's quashing of similar show cause notices. However, for the substitution of grades, the extended period was applicable. The third member agreed with Member (Judicial) on the limitation issue.

Final Order:
1. Demand of Rs. 7,05,95,368.00 set aside.
2. Demand of Rs. 48,48,500.00 set aside.
3. Demand of Rs. 58,96,580.00 confirmed.
4. Penalty on the appellant company reduced to Rs. 10,00,000.00.
5. Penalty on the Managing Director set aside.