2016 (3) TMI 516 - AT - Central Excise

Ineligibility for the SSI benefit - whether the appellant has exceeded the turn-over of ₹ 2 crore in the year 1989-90 so as to become ineligible for the SSI benefit for the period 1990-91 - Held that - As regards the penalty we find that the said penalty is in respect of delayed execution of contract with the buyers. In our considered view, during the period in question 1989-90, the provisions of Section 4 of the Central Excise Act, 1944 contemplated the assessable value to be the normal price at which the goods are sold. In the case in hand, the normal price of the goods is the price at which the goods were sold at the factory gate when the clearances took place under the Central Excise gate passes. The penalty amount which has been paid by the appellant during the relevant period was not claimed as deductions from the price-lists filed by the appellant nor was it mentioned to the lower authorities in any form. Accordingly, we find that the appellant s claim that the amount which has been deducted from their account by the buyers for its delay in execution in contracts is not correct and the proposition needs to be rejected. In the case in hand, the period being prior to the concept of transaction value, normal price needs to be arrived based upon the declarations made by the assessee. In this case, there was no such declaration as to claim the deduction of an amount deducted to their account as penalty by the buyers for the delayed execution of contracts. As regards freight and insurance, we find that the adjudicating authority has correctly come to the conclusion that the actual amount of freight paid by the appellant has been considered and that majority of amount has been allowed as deduction. The claim of the learned counsel that freight and insurance amount has been wrongly calculated has no merit as we find that the actual freight amount incurred has been considered. Thus we find that the conclusion reached by the adjudicating authority is correct. Invoking extended period of limitation - We find that the declarations made by the appellant did not indicate how they have worked out the clearance value of ₹ 1.99 crore. The entire value of ₹ 2 crore was worked out based upon their own documents which was checked by the authority during the visit to their factory. Hence there has been mis-declaration of the value and accordingly the claim of the appellant that the issue is time-barred also has no force. As regards the penalty imposed, we find that the penalty has been imposed under Rule 173Q of the Central Excise Rules, 1944. We find that there is no serious contravention of Rules, as such in the case in hand, as there could be a mis-conception of the issue in respect of the addition and deletion of the sales turn-over that needs to be considered for being eligible for the benefit of small scale exemption Notification 175/86. In our considered view, we find that the issue being a calculation error, attributable to human error and accordingly it is held penalty imposed on the appellant is unwarranted. The penalty as imposed is set aside. In sum, the demand of Central Excise duty along with interest is upheld and the penalty imposed by the adjudicating authority is set aside.

Issues:
1. Exceeding the turnover limit for small scale exemption under Notification 175/86.
2. Correct computation of clearance value for the year 1989-90.
3. Deduction of penalty paid for delayed execution of contracts from clearance value.
4. Calculation of freight and insurance charges.
5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.
6. Grounds of limitation for the case.

Issue 1: Exceeding Turnover Limit for Small Scale Exemption:
The case involved the appellant, a manufacturer, claiming small scale exemption under Notification 175/86 but was found to have exceeded the turnover limit of Rs. 2 crore during the financial year 1989-90. The Tribunal considered the appellant's argument that the threshold was not breached due to incorrect computation of clearance value. The appellant contended that certain expenses were not considered, which if included, would bring the clearance value below Rs. 2 crore. However, the Tribunal upheld the adjudicating authority's decision, stating that the penalty paid by the appellant for delayed contracts could not be deducted from the clearance value.

Issue 2: Correct Computation of Clearance Value:
The appellant argued that the adjudicating authority incorrectly calculated the clearance value by not allowing deductions for penalty, freight, and insurance. The Tribunal analyzed the provisions of the Central Excise Act, 1944, and found that penalty amounts paid by the appellant were not eligible for deduction as they were not declared in the price-lists. The Tribunal also confirmed that the freight and insurance charges were correctly calculated based on documents provided by the appellant.

Issue 3: Deduction of Penalty for Delayed Contracts:
Regarding the penalty paid for delayed contract execution, the Tribunal determined that such penalties could not be deducted from the clearance value as they were not part of the declared price. The Tribunal differentiated the case from post-amendment scenarios and emphasized that the penalty paid was not factored into the price-lists submitted by the appellant.

Issue 4: Imposition of Penalty under Rule 173Q:
The penalty imposed under Rule 173Q of the Central Excise Rules, 1944, was contested by the appellant. The Tribunal ruled that the penalty was unwarranted as it stemmed from a calculation error rather than a serious contravention of rules. The penalty was set aside based on the understanding that it was due to human error in the calculation process.

Issue 5: Grounds of Limitation:
The appellant raised concerns about the limitation period, arguing that the issue was time-barred. However, the Tribunal found that the appellant's declarations did not accurately reflect the clearance value, leading to a misdeclaration. Consequently, the limitation argument was dismissed.

In conclusion, the Tribunal upheld the demand for Central Excise duty and interest while setting aside the penalty imposed by the adjudicating authority. The appeal was disposed of based on the findings related to the issues discussed above.

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