2006 (7) TMI 478 - AT - Central Excise

Tribunal includes royalty in assessable value, penalties reduced post introduction of relevant sections

The Tribunal upheld the inclusion of royalty in the assessable value of goods sold, rejecting the appellants' argument that the Brand owner was not a ... Valuation - Transaction value - Rejection of - Demand - Limitation - Suppression of fact Issues:Assessment of sales value, Inclusion of royalty in assessable value, Related persons under Section 4, Time-barring of demand, Imposition of interest and penalty under Section 11AB & 11AC, Confiscation of assets.Assessment of sales value:The appellants manufactured Portable Torches under the Brand name 'NOVINO' and sold them directly and through the Brand owner. The Adjudicating Commissioner ordered assessment of sales to the Brand owner at the price the appellants cleared the goods for transfer to their own depot. The appellants contested this order, arguing that the Brand owner was not a related person and royalty need not be included in the assessable value. However, the Commissioner found sufficient evidence to conclude that price was not the sole consideration for sale, leading to the rejection of the appellants' argument.Inclusion of royalty in assessable value:The appellants contended that royalty should not be included in the assessable value of goods sold to the Brand owner. They cited various decisions in support of their argument. However, the Tribunal held that in this case, the price was not the sole consideration for sale between the appellants and the Brand owner, making the inclusion of royalty necessary in the assessable value.Related persons under Section 4:The Tribunal emphasized that under Section 4 of the Central Excise Act, the buyer should not be a related person for the price to be accepted as assessable value. Even if the buyer and seller are not related, the price must be the sole consideration for sale. In this case, it was found that the price was not the sole consideration for sales to the Brand owner, justifying the inclusion of royalty in the assessable value.Time-barring of demand:The appellants argued that the demand was time-barred as the show cause notice was issued after the introduction of certain provisions. However, the Commissioner noted that crucial information, including the ownership of the Brand name and agreements with the Brand owner, was suppressed by the appellants. This non-disclosure affected the time-barring contention.Imposition of interest and penalty under Section 11AB & 11AC:While the Tribunal agreed that interest and penalty could not be imposed before a certain date, they found that for the period after the introduction of the relevant sections, the imposition was justified. Considering the facts and circumstances, the penalty was reduced, and confiscation of assets was set aside.Confiscation of assets:The Tribunal determined that confiscation of assets was not warranted in this case and set aside the confiscation order. The appeal was partly allowed with modifications in penalties and confiscation.This detailed analysis of the judgment addresses the key issues involved and the Tribunal's findings on each matter, providing a comprehensive overview of the legal decision.