2001 (2) TMI 527 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of notional interest on advances in the assessable value.
2. Duty on profit from trading goods included in the assessable value of manufactured goods.
3. Classification of machinery and equipment cleared in knocked down condition as parts or complete machines.
4. Imposition of personal penalty and interest under Sections 11AC and 11AB for the period prior to their enactment.

Issue-wise Detailed Analysis:

1. Inclusion of Notional Interest on Advances in Assessable Value:
The Commissioner confirmed a demand of duty by including notional interest on advances received by the appellants from their customers. The appellants argued that these advances were meant to safeguard against order cancellations and did not influence the contract price. The Commissioner failed to provide evidence that the advances depressed the prices. The Tribunal, referencing several judgments including C.C.E. v. Laxmi Engineering Industries and Promac Engineering Industries Ltd. v. C.C.E., concluded that notional interest on advances should not be included in the assessable value without evidence of price influence. The demand on this count was set aside.

2. Duty on Profit from Trading Goods:
The Commissioner demanded duty on profits made from trading goods, alleging these profits were included in the assessable value of the appellant's manufactured goods. The appellants contended that their profit margins were higher on shop-manufactured items than on traded goods, supported by a Chartered Accountant's certificate. The Tribunal agreed that trading profits should not be included in the assessable value of manufactured goods. However, the Tribunal noted the Commissioner's error in ignoring the Chartered Accountant's certificate and relying on a single instance of lower selling price. The Tribunal remitted this issue for de novo adjudication, instructing the Commissioner to consider the Chartered Accountant's certificate and the overall profit margins.

3. Classification of Machinery and Equipment:
The Commissioner classified machinery and equipment cleared in knocked down condition as parts, rather than complete machines, leading to a higher duty demand. The appellants argued that their contracts were for complete machines, and duty was paid on the entire machine cost, whether parts were manufactured in-house or procured. The Tribunal, referencing Rule 2(a) of the Rules for Interpretation of the Tariff and the case of Vishwa Industrial Company Private Limited v. CCE, agreed that the machinery should be assessed as complete machines if cleared in CKD or SKD condition. The Tribunal remitted the matter for de novo adjudication to verify whether the bought-out parts were brought into the factory and cleared as a complete system.

4. Imposition of Personal Penalty and Interest:
The Commissioner imposed a personal penalty and interest under Sections 11AC and 11AB for the period prior to their enactment on 28-9-1996. The Tribunal noted that these sections are not retrospective and cannot apply to demands for periods before their enactment. Citing relevant case law, the Tribunal set aside the imposition of personal penalty and interest for the period in question.

Conclusion:
The appeal was partly allowed and partly remanded. The Tribunal set aside the demands related to notional interest on advances and trading profits, remitting the latter for reconsideration. The classification issue was also remanded for verification of facts. The imposition of personal penalty and interest was set aside for the period prior to the enactment of Sections 11AC and 11AB.