2024 (7) TMI 545 - AT - Central Excise

Valuation - determination of assessable value - whether pool lifting charges collected by the appellants from the dealers is includable in the assessable value of Motor Vehicles cleared by the appellants? - HELD THAT - The reasoning given by the appellants, stating that the pool lifting charges do not add any value to the marketability of the vehicles sold, is not acceptable. Tribunal in the case of Victory Electricals Ltd 2013 (12) TMI 81 - CESTAT CHENNAI held that on the aforesaid analysis, the reference is answered by holding that whatever the assessee, as per the terms of the contract and on account of delay in delivery of manufactured goods is liable to pay a lesser amount than the generically agreed price as a result of a clause (in the agreement), stipulating variation in the price, on account of liability to liquidated damages , irrespective of whether the clause is titled penalty or liquidated damages , the resultant price would be the transaction Value‟, and such value shall be liable to levy of excise duty, at the applicable rate. Extended period of limitation - penalty - HELD THAT - It is found that various show cause notices have been issued to the appellants over the years based on very same financial records. In case, the department missed out on certain issues during the earlier scrutiny, the blame cannot be put on the appellants and extended period cannot be invoked in the instant case. Moreover, it is amused to find that the Ld. Commissioner hold that Mens rea is not required in transaction matters for imposition of penalty. This is against the settled principle of law as envisaged in a catena of judgments. Therefore, the Department has not made out any case for either invoking extended period or for imposition of penalty. Both the appeals are partly allowed restricting the demand to normal period and setting aside the penalty. However, the appellants are required to pay interest, as applicable, on the duty confirmed for the normal period. Appeal allowed in part.

Summary

Issues Involved:
1. Inclusion of pool lifting charges in the assessable value of motor vehicles.
2. Invocation of the extended period for demand.
3. Imposition of penalty and interest.

Issue-wise Detailed Analysis:

1. Inclusion of Pool Lifting Charges in the Assessable Value:

The primary issue was whether the pool lifting charges collected by the appellants from the dealers should be included in the assessable value of motor vehicles. The appellants argued that these charges are independent of the sale of vehicles and do not affect the vehicle's marketability. They contended that the charges are for the out-of-turn dispatch of vehicles and are not related to the sale of the vehicles themselves.

The Learned Commissioner, however, found that the pool lifting charges are related to the number of vehicles sold and should be included in the assessable value. The Commissioner noted that these charges are an additional consideration received by the appellants in connection with the sale of vehicles. The Tribunal agreed, stating that the charges are levied with reference to the vehicles lifted by dealers from the pool and are therefore part of the transaction value as defined under Section 4 of the Central Excise Act, 1944.

The Tribunal held that the pool lifting charges are an additional consideration flowing back to the appellants and should be included in the assessable value. The reasoning was that these charges are related to the sale of additional vehicles and are not independent transactions.

2. Invocation of the Extended Period for Demand:

The appellants argued that the extended period for demand should not be invoked as all relevant facts were within the knowledge of the department, and there was no suppression with intent to evade duty. They maintained that they had consistently submitted their annual reports and balance sheets to the department, which were the basis for issuing show cause notices on other issues.

The Tribunal agreed with the appellants, stating that the transactions of a large unit like the appellants could not have escaped the department's scrutiny over the years. The Tribunal found that various show cause notices had been issued based on the same financial records, and if the department missed certain issues during earlier scrutiny, the blame could not be placed on the appellants. Therefore, the invocation of the extended period was not justified.

3. Imposition of Penalty and Interest:

The Commissioner had imposed a penalty under Section 11AC of the Central Excise Act, 1944, stating that "Mens rea" is not required for imposition of penalty in transaction matters. The appellants contended that this was against the settled principle of law, which requires intent to evade duty for imposing penalties.

The Tribunal agreed with the appellants, finding that the department had not made a case for invoking the extended period or for imposing a penalty. However, the Tribunal held that the appellants are required to pay interest on the duty confirmed for the normal period.

Conclusion:

In conclusion, the Tribunal partly allowed the appeals, restricting the demand to the normal period and setting aside the penalty. The appellants were required to pay interest on the duty confirmed for the normal period. The Tribunal's decision emphasized that the pool lifting charges are part of the assessable value and that the extended period for demand and penalties were not justified in this case.