1999 (8) TMI 533 - AT - Central Excise

Issues Involved:
1. Assessable value of microphone capsules sold to Versat Electronics Pvt. Ltd.
2. Alleged suppression of agreement between AKG Acoustics and Versat Electronics.
3. Imposition of penalty under Section 11AC of the Central Excise Act.
4. Imposition of penalty under Rule 173Q of the Central Excise Rules.
5. Applicability of extended period for raising duty demand.

Issue-wise Detailed Analysis:

1. Assessable Value of Microphone Capsules Sold to Versat Electronics Pvt. Ltd.:
The Department alleged that the microphone capsules sold to Versat were at a much lower price compared to the sale price of capsules sold from the depots, and sought to adopt the ex-depot price for arriving at the assessable value of sales made to Versat. AKG contended that the sales to Versat, who constituted a different class of buyers, were made at the factory gate and were not comparable to retail sales made from depots to dealers/distributors. The Tribunal found force in AKG's contention that the price charged to one class of buyers cannot automatically be adopted as the price for another class of buyers, citing the Supreme Court's decision in MRF Ltd. The Tribunal concluded that Versat, being an industrial consumer of Original Equipment (OE), formed a different class of buyers from retail buyers.

2. Alleged Suppression of Agreement Between AKG Acoustics and Versat Electronics:
The Department argued that AKG suppressed their agreement with Versat, which was material for arriving at the normal price, thus attracting the provisions of Section 11A(1) proviso. AKG countered that there was no requirement under law to file such an agreement, especially when RT 12 returns had been filed and approved. The Tribunal agreed with AKG, stating that failure to attach the agreement did not amount to suppression with the intent to evade duty.

3. Imposition of Penalty Under Section 11AC of the Central Excise Act:
AKG argued that Section 11AC, inserted by the Finance Act, 1996, could not be applied retrospectively to their case, as the demand related to a period before the enactment of the provision. The Tribunal upheld this argument, noting that penal provisions cannot be given retrospective effect.

4. Imposition of Penalty Under Rule 173Q of the Central Excise Rules:
AKG contended that penalty under Rule 173Q was not imposable as there was no contravention of any provision of law. The Tribunal found merit in this argument, considering the facts of the case and the approved price lists filed by both AKG and Versat.

5. Applicability of Extended Period for Raising Duty Demand:
The Department invoked the extended period for raising the duty demand, alleging suppression of facts by AKG. The Tribunal, however, found that the approved price lists and the absence of a requirement to file the agreement negated the allegation of suppression with intent to evade duty.

Conclusion:
The Tribunal allowed the appeals filed by AKG Acoustics India Ltd. and Versat Electronics Pvt. Ltd., setting aside the impugned orders and the associated penalties. The Tribunal recognized Versat as a different class of buyers and found no basis for treating the sales to Versat as depressed prices. The imposition of penalties under Section 11AC and Rule 173Q was also deemed unsustainable. Consequently, the appeals were allowed with consequential benefits to the appellants under the law.

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