2013 (9) TMI 720 - AT - Central Excise

Valuation - inclusion of incidental charges - Place of removal - Held that - appellant had discharged the duty liability on the clearances made during this period at a price considered as factory gate sale price - price for such clearances was the right basis for determining the value for assessment of the impugned clearances prior to 1.7.2000. Unless duty was paid on lower value compared to contemporaneous price for sale of such goods to unrelated buyers at the factory gate, in respect of these clearances, there is no case or any demand - during this material period there was no definition in the provisions of the Central Excise Act for the place of removal - there cannot be any demand on the appellant, there being absence of definition of place of removal in the Central Excise Act, 1944. Regarding demand of duty for the period from 1.7.2000 to 13.5.2003 - Demand of duty liability on the incidental charges charged by the appellant for transfer of goods from Hyderabad to various depots needs to be included in the assessable value for this period and duty has to be demanded from them. The exact quantification of duty needs to be done by the adjudicating authority, as the show-cause notices issued are overlapping; we would leave the quantification issue to the adjudicating authority to come to a conclusion. Since the demand requires re-quantification, the penalty amount and the interest on the demand of the duty liability also needs to be worked out proportionate to the demand. To that extent only for the quantification of the demand for the period from 14.5.2003 to 30.6.2004, the matter is remitted to the adjudicating authority - Decided against assessee.

Issues Involved:
1. Whether the appellant is required to pay the differential duty on the 'incidental charges' for clearance of final goods to various depots.
2. Whether clearances from such other depots would constitute clearance from a 'place of removal'.
3. Validity of the extended period invoked for issuing the show-cause notice.
4. Applicability of the decisions of the Hon'ble Supreme Court in similar cases.
5. Validity of penalties imposed on the appellant.

Detailed Analysis:

1. Differential Duty on 'Incidental Charges':
The appellant, a manufacturer of paper and paper products, contested the confirmation of differential duty along with interest and penalties imposed by the adjudicating authority based on eight show-cause notices. The appellant argued that the conversion of paper reels into reams at their Hyderabad depot does not amount to manufacturing a new product, thus no additional duty should be levied on the incidental charges (freight and insurance) incurred during stock transfers. The Tribunal examined the period from 28.9.1996 to 30.6.2004 and segmented it into three distinct periods for analysis.

2. Clearance from 'Place of Removal':
The Tribunal noted that for the period from 28.9.1996 to 30.6.2000, the place of removal was considered the factory gate, and the conversion of paper reels into reams did not constitute manufacturing. Therefore, the factory gate sale price should be adopted for duty liability, and the demand for this period was set aside. For the period from 1.7.2000 to 13.5.2003, there was no definition of 'place of removal' in the Central Excise Act, 1944, leading the Tribunal to conclude that no demand could be raised for this period. However, for the period from 14.5.2003 to 30.6.2004, the definition of 'place of removal' was included in the Central Excise Act, and the Tribunal held that the incidental charges must be included in the assessable value, thus upholding the demand for this period.

3. Extended Period for Show-Cause Notice:
The appellant argued that the extended period invoked in one of the show-cause notices dated 14.8.2000 was incorrect since similar issues had previously been decided in favor of the assessee by the Tribunal. The Tribunal did not explicitly address this argument in the judgment, focusing instead on the merits of the case for each segmented period.

4. Applicability of Supreme Court Decisions:
The appellant cited decisions from the Hon'ble Supreme Court in cases like Baroda Electric Meters Ltd. vs. CCE, Indian Oxygen Ltd. vs. CCE, and Hindustan Lever Ltd. vs. CCE, arguing that these decisions supported their case. However, the Tribunal found that these cases did not directly apply to the facts at hand, as the issue involved here was the inclusion of incidental charges in the assessable value for goods cleared from depots.

5. Validity of Penalties:
Given that the demand for the periods from 28.9.1996 to 13.5.2003 was set aside, the Tribunal held that any penalties imposed for these periods should also be set aside. For the period from 14.5.2003 to 30.6.2004, the Tribunal remitted the matter to the adjudicating authority for re-quantification of the duty demand, penalties, and interest based on the inclusion of incidental charges in the assessable value.

Conclusion:
The appeal was disposed of with the Tribunal setting aside the demand and penalties for the periods from 28.9.1996 to 13.5.2003. For the period from 14.5.2003 to 30.6.2004, the matter was remitted to the adjudicating authority for re-quantification of the duty, penalties, and interest, considering the inclusion of incidental charges in the assessable value. The Tribunal did not record findings on other arguments raised by both sides due to the decision on merits for the specified period.

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