2005 (7) TMI 266 - AT - Central Excise

Summary

Issues:
- Demand of Central Excise duty on discounts passed on to customers
- Imposition of penalties under relevant sections
- Time-barred demand for the period from December 1996 to June 2000
- Duty on the amount received from the Insurance Company

Analysis:

1. Demand of Central Excise Duty on Discounts Passed on to Customers:
- The appellants manufactured polyester film in filament yarn and provided various discounts to customers, passing them on through credit notes.
- The Commissioner demanded an amount under Proviso to Section 11A(1) of the Central Excise Act, alleging duty on the portion of discount not passed on to customers.
- The appellants argued that discounts are admissible deductions as per relevant case laws and that even if a small percentage of customers did not avail discounts, they are entitled to the entire discounts.
- The Tribunal found that the appellants informed the department about the discounts offered and kept them updated on the practice of passing on discounts.
- The Tribunal concluded that the demand of duty on discounts not passed on is not sustainable, especially considering the substantial excess discounts passed on by the appellants.

2. Imposition of Penalties under Relevant Sections:
- The Commissioner imposed penalties under Section 11AC of the Act and Rules 173Q and 210 of the Central Excise Act, 1944.
- The appellants argued that penalties and demand of interest are not sustainable, citing various case laws supporting their contention.
- The Tribunal, after reviewing the submissions and case laws, found that the penalties imposed were not justified, considering the facts of the case and the appellants' compliance with the department's requirements regarding discounts.

3. Time-Barred Demand for the Period from December 1996 to June 2000:
- The appellants contended that the demand for the period in question was time-barred as the show cause notice was issued after the relevant period.
- They argued that the longer period under Proviso to Section 11A was not sustainable due to various reasons, including the department's awareness of the discounts offered and the appellants' compliance with filing declarations.
- The Tribunal agreed with the appellants, stating that the demand for the period was time-barred, considering the facts presented and the absence of intention to evade duty.

4. Duty on the Amount Received from the Insurance Company:
- The demand also included duty on the amount received from the Insurance Company for damaged goods, refund of excess premium paid, and survey fees.
- The appellants argued that the department failed to establish the relationship of the amount received to specific clearances or customers.
- The Tribunal found that the demand on the amount received from the Insurance Company was not sustainable as it lacked proper substantiation and legal basis under the Central Excise Act.

In conclusion, the Appellate Tribunal CESTAT, Bangalore, allowed the appeal with consequential relief, ruling in favor of the appellants on all issues raised, including the demand of Central Excise duty on discounts, imposition of penalties, time-barred demand, and duty on the amount received from the Insurance Company.