2002 (9) TMI 168 - AT - Central Excise

Summary

Issues Involved:
1. Determination of assessable value of PET chips considering the retention of Methanol as an additional consideration.
2. Applicability of extended period of limitation for issuing the show-cause notice.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
4. Liability to pay interest under Section 11AB of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value:
The appellants, M/s. Flex Chemicals Ltd., manufacture PET chips and also perform job work for their sister concern, M/s. Flex Industries Ltd. (FIL). The job work involves two processes: one using DMT, MEG, and catalyst, which produces Methanol as a by-product retained by the appellants, and the other using PTA and MEG + catalyst, which does not produce any by-product. The Central Excise authorities determined that the retention of Methanol constituted an additional consideration. As per Section 4(2) of the Central Excise Act, 1944, and Rule 5 of the Central Excise (Valuation) Rules, 1975, the value of PET chips should include the money value of any additional consideration. Consequently, the assessable value was increased by Rs. 4000.00 PMT, leading to a demand of Rs. 24,24,648/- for the period from February 1997 to September 1997.

2. Applicability of Extended Period of Limitation:
The appellants argued that the demand was time-barred as the department had knowledge of the different job work charges since 12-12-97. They contended that the show-cause notice issued on 24-3-2001 was beyond the six-month limitation period. However, the Tribunal referred to the Larger Bench decision in Nizam Sugar Factory v. CCE, Hyderabad, which stated that the extended period of five years is applicable in cases involving fraud, suppression, or wilful mis-statement, regardless of when the department acquired knowledge of the facts. The Tribunal found no merit in the appellants' contention and upheld the applicability of the extended period.

3. Imposition of Penalty under Section 11AC:
The appellants contested the imposition of a penalty under Section 11AC, arguing that the facts were already known to the department from an earlier show-cause notice dated 3-3-98, which did not allege suppression or fraud. The Tribunal rejected this argument, stating that the appellants' acceptance of duty liability and payment without contesting the demand indicated that the extended period for penalty was applicable. However, considering that the appellants had paid the duty amount well before the issue of the show-cause notice, the Tribunal reduced the penalty from an equal amount to Rs. 2 lakhs.

4. Liability to Pay Interest under Section 11AB:
The Tribunal upheld the liability of the appellants to pay interest under Section 11AB of the Central Excise Act, 1944, as confirmed by the adjudicating authority.

Conclusion:
The Tribunal confirmed the demand of Rs. 24,24,648/- and upheld the liability to pay interest under Section 11AB. The penalty under Section 11AC was reduced to Rs. 2 lakhs, considering the early payment of the duty amount by the appellants. The appeal was disposed of accordingly.