Excise duty appeal allowed, demand quashed. Legitimate deduction of duty. Limitation period inapplicable. Section 11D not invoked.

The Tribunal allowed the appeal, setting aside the impugned order. The demand for duty, interest, and penalty was quashed. The Tribunal held that the deduction of excise duty from the cum-duty price to determine the transaction value was legitimate under the law. It also ruled that the extended period of limitation for demanding duty was inapplicable due to the department's awareness of the calculation method. Furthermore, invoking Section 11D of the Central Excise Act was deemed improper as it was not mentioned in the show cause notice, leading to the order being set aside.

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Issues Involved:
1. Legitimacy of claiming deduction on account of duty from the cum-duty price to arrive at the transaction value.
2. Applicability of the extended period of limitation for demanding duty.
3. Legality of invoking Section 11D of the Central Excise Act in the impugned order.

Detailed Analysis:

1. Legitimacy of Claiming Deduction on Account of Duty:
The central issue revolves around whether the appellants were correct in claiming the deduction on account of duty from the cum-duty price of Luxor to arrive at the transaction value. The appellants argued that such deductions were in accordance with Section 4(3)(d) and the explanation to Section 4(1). The explanation to Section 4(1) states that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold, excluding sales tax and other taxes, and shall be deemed to include the duty payable on such goods. The appellants contended that the deductions were necessary to determine the eligibility for exemption notifications which granted nil rate of duty for pens of value less than Rs. 100/Rs. 200.

The Commissioner, however, disallowed the deduction of excise duty, relying on the decisions of the Supreme Court in Bata India Limited (1996) and Amrit Agro Industries Limited (2007). These decisions were rendered in the context of Section 4 as it stood prior to the introduction of transaction value on 01.07.2000. The Tribunal found that these decisions were not applicable to the present case, as the concept of price-cum-duty was introduced only after 14.05.2003.

The Tribunal agreed with the appellants that the calculation of assessable value, which included deductions for excise duty, was in line with the concept of transaction value as defined in Section 4(3)(d) and the explanation to Section 4(1). The Tribunal also found that the decision in Bata Shoes (1985) was more applicable to the present case, as it supported the deduction of excise duty to determine the value of the goods for exemption purposes.

2. Applicability of the Extended Period of Limitation:
The appellants argued that they had been regularly filing price declarations with the department, detailing the method of calculation of assessable value, including the deduction for excise duty. Since these declarations were scrutinized during periodic audits, the department was aware of the facts, and there was no suppression of facts on the part of the appellants. Consequently, the extended period of limitation for demanding duty was not applicable.

The Tribunal agreed with the appellants, noting that the method of calculation of value had been clearly indicated in the price declarations, and all relevant facts were within the knowledge of the department. Therefore, the extended period of limitation could not be invoked.

3. Legality of Invoking Section 11D:
The appellants contended that the Commissioner had wrongly invoked Section 11D of the Central Excise Act to confirm the demand of duty, as this provision was not mentioned in the show cause notice. The Tribunal found that the ground of Section 11D was not raised in the relevant show cause notice, and therefore, the impugned order had traveled beyond the scope of the show cause notice.

Conclusion:
The Tribunal found no merit in the impugned order and set it aside. The appeal was allowed, and the demand for duty, along with interest and penalty, was quashed. The Tribunal emphasized that the calculation of assessable value, including the deduction of excise duty, was in accordance with the law, and the extended period of limitation was not applicable. Additionally, the invocation of Section 11D was deemed legally unsustainable as it was not part of the show cause notice.

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