2007 (2) TMI 25 - AT - Central Excise

Supreme Court remands case for further review on duty demands and penalties.

S KUMARS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE-I

The Supreme Court remanded the case to the Tribunal to decide on the issue of relationship among other issues. The duty demands raised beyond the normal ... Demand – alleged that appellant used to mis-statement or suppression of facts and accordingly duty were demanded- After considering the detail authority allow the appeal partly Issues Involved:1. Relationship between the parties.2. Limitation for raising duty demands.3. Eligibility of discounts for deduction.4. Transactions involving dummy parties.Detailed Analysis:Relationship Between the Parties:The first appellant, M/s. S. Kumars Limited, was involved in processing grey fabric, and a part of this processing was for related parties. The issue was whether the goods processed for related parties should be valued according to the prices at which related persons sold them to unrelated persons. The Hon'ble Supreme Court remanded the case to the Tribunal to decide on the issue of relationship among other issues.Limitation for Raising Duty Demands:The duty demand raised in the show cause notice covered the period from 1-9-85 to 13-9-89, issued on 5-10-90, which was beyond the normal period of one year. The demand invoked the proviso to Section 11A of the Central Excise Act, 1944, which extends the period to five years in cases involving fraud, collusion, willful mis-statement, or suppression of facts with intent to evade duty. The appellant contended that the circumstances for invoking the proviso were absent as the revenue was aware of the relevant facts, and there was no suppression or mis-statement.The Tribunal found that the valuation of fabrics was done based on excise-approved Price Lists, and monthly returns were finalized without objections. Investigations during the relevant period, including searches and document seizures, revealed no grounds for revising the assessable value or raising tax demands. The Tribunal concluded that the issues raised in the 1990 show cause notice were already known to the revenue during the relevant period, indicating a change of opinion rather than suppression or mis-statement of facts.Eligibility of Discounts for Deduction:The appellant argued that the eligibility of discounts for deduction was under contemporaneous examination. Correspondence from the Office of Collector of Customs and Central Excise, Indore, dated 29-4-86, and the appellant's response on 5-5-86 clarified the factual position regarding discounts and advertisement expenses. The Tribunal noted that the revenue was aware of the involvement and collections by M/s. S. Kumar Research & Development Pvt. Ltd. and that all relevant materials and clarifications were provided during a special investigation. Therefore, the Tribunal held that the revenue could not contend there was suppression of facts with intent to evade duty.Transactions Involving Dummy Parties:The Tribunal distinguished the issue of dummy parties, stating that the existence of dummy parties was not the subject of any earlier communication or investigation. Therefore, duty demands and penalties related to transactions involving dummy parties were not covered by the findings on limitation and suppression of facts.Conclusion:The Tribunal held that the duty demands raised beyond the normal period on the grounds of related parties and ineligible discounts were not sustainable. These demands and the associated penalties were set aside. However, the Tribunal remanded the duty demands and penalties related to dummy parties and those falling within the normal period to the Commissioner for fresh quantification.Order:The appeals were partly allowed, and the duty demands and penalties relating to dummy units and within the normal period were remanded for fresh determination. The judgment was pronounced in the open court on 6-2-2007.