2005 (11) TMI 69 - SC - Central Excise

Supreme Court affirms Tribunal's decision on excise duty evasion case, stresses fair pricing and consistency

COMMISSIONER OF CENTRAL EXCISE, MUMBAI Versus UNIVERSAL LUGGAGE MFG. CO. LTD.

The Supreme Court upheld the Tribunal and Collector's conclusions in a case involving alleged excise duty evasion through a subsidiary company. It was ... Excise duty evasion - Held that:- It is not disputed that the sales made to the persons other than the related person, were of significant quantity, viz, for the period from 1st June, 1987 to March 1988 the sales to persons other than the related person was to the tune of nearly 36% and for the period from June 1988 to March 1989 the same was to the tune of nearly 43%. Thus, in our view, the price at which the goods were sold to the persons other than the related person could form the basis for determining the value of the goods for the purposes of levying duty thereon. Since the assessee had cleared the goods by way of sale in favour of a related person at the same price at which it had been sold to other buyers, we are inclined to accept the view taken by the Tribunal as well as that of the Collector. Appeal dismissed. Issues:1. Alleged evasion of excise duty by reducing assessable value through a subsidiary company.2. Show cause notice issued by the Collector of Central Excise.3. Discharge of notice by the Collector.4. Upholding of Collector's findings by the Tribunal.5. Determination of assessable value for levying duty.Analysis:1. The case involved the allegation of evasion of excise duty by a company engaged in manufacturing luggage through the use of a subsidiary company. The appellant contended that the assessee deliberately reduced the assessable value of its products by routing sales through the subsidiary company, thereby evading excise duty.2. The Collector of Central Excise issued a show cause notice to the assessee, directing them to explain why the prices at which goods were sold by the subsidiary company should not be considered as the assessable value for charging central excise duty. The notice also sought recovery of differential duty, imposition of penalties, and possible confiscation of assets.3. The respondent contested the notice, arguing that there was no evasion of excise duty as the goods were sold at the same price to the subsidiary company and other dealers, including the Canteen Stores Department. The Collector discharged the notice, emphasizing that no special consideration was given to the subsidiary company, and sales were made at declared prices.4. The Tribunal upheld the Collector's findings, noting that the prices at which goods were sold to different buyers, including the subsidiary company, were the same. The Tribunal accepted that there was no favoritism shown to the related person, and the sales were made in accordance with the declared prices.5. The Supreme Court, after considering the sales pattern and quantities sold to unrelated parties, concurred with the Tribunal and Collector's conclusions. It was determined that since goods were sold at the same price to both related and unrelated parties, the price at which goods were sold to unrelated parties could be used to determine the value for levying duty. Consequently, the appeals were dismissed, and no costs were awarded.This detailed analysis highlights the progression of the case from the initial allegations of excise duty evasion to the final decision of the Supreme Court based on the findings of the lower authorities.