1997 (11) TMI 369 - AT - Central Excise

Issues Involved:
1. Determination of aggregate value of clearances.
2. Calculation of Central Excise Duty (CED) liability.
3. Eligibility for small scale exemption.
4. Treatment of prices as cum-duty or ex-duty.
5. Applicability of penalties for non-compliance.

Issue-wise Detailed Analysis:

1. Determination of Aggregate Value of Clearances:
The appellants, M/s. New Star Chemicals, argued that the value on which the CED had been demanded should be taken as their cum-duty price. They requested that their duty liability be re-determined after deducting the duty element from their aggregate value of clearances. The Tribunal clarified that the aggregate value of clearances must be determined as per Section 4 of the Central Excises & Salt Act, 1944. The value under Section 4 is different from the cum-duty price, and as such, the aggregate value of clearances should not include any component of CED that was not paid.

2. Calculation of Central Excise Duty (CED) Liability:
The appellants had not paid any CED on the clearances exceeding the exemption limit. The Tribunal held that since no CED was paid at the point of clearance, the prices could not be considered as cum-duty prices. The Delhi High Court in I.T.C. Ltd. v. Union of India and the Andhra Pradesh High Court in Assistant Collector of Central Excise, Rajahmundry v. Andhra Pradesh Paper Mills Ltd. supported the view that only the effective duty actually paid could be excluded from the cum-duty price. Therefore, the duty liability was determined based on the aggregate value of clearances without any deduction for unpaid CED.

3. Eligibility for Small Scale Exemption:
The appellants failed to file the necessary declarations and obtain the central excise license required to avail of the small scale exemption under Notification No. 43/82-C.E. The Tribunal noted that the appellants had exceeded the exemption limit in the years 1983-84 and 1984-85 and had not paid any excise duty on the excess clearances. Consequently, they were not eligible for the small scale exemption.

4. Treatment of Prices as Cum-duty or Ex-duty:
The Tribunal's majority decision, led by Member (J), Archana Wadhwa, held that the duty liability should be calculated by treating the prices as cum-duty prices. The reasoning was that if the appellant company had no legal right to recover duty separately from its customers, the prices should be considered as cum-duty prices. This view was supported by the Tribunal's decisions in Indian Oxygen Ltd. v. Collector of Central Excise and Quorer Electronics Pvt. Ltd. v. Collector of Central Excise. The dissenting opinion by Member (T), Lajja Ram, argued that since no duty was paid at the time of clearance, the prices should be treated as ex-duty prices.

5. Applicability of Penalties for Non-compliance:
The appellants had not obtained the central excise license and had removed dutiable goods without payment of duty. The duty evaded was calculated as Rs. 1,21,401.78, and a penalty of Rs. 5,000/- was imposed. The Tribunal found the penalty amount reasonable given the circumstances of the case.

Majority Decision:
In view of the majority decision, it was held that the duty liability of the appellant company is to be calculated by treating the prices as cum-duty prices. Accordingly, the appeal was allowed.

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