2000 (7) TMI 183 - AT - Central Excise

Tax Appeals: Assessees win, Department loses. Duty and penalties set aside.

The appeals by the assessees (M/s. Jay Laminart Limited, M/s. Jay Enterprises, and M/s. Meghdev Enterprises) were allowed, and the demands for duty and ... Appeal - Valuation (Central Excise) - Normal Production Issues Involved:1. Application of ILMA prices for duty assessment.2. Alleged illicit manufacture and clearance of laminated sheets based on base paper consumption ratio.3. Payment of lower duty on first-grade products cleared as second and third grade.4. Alleged additional consideration received as commission.Issue-wise Detailed Analysis:1. Application of ILMA Prices for Duty Assessment:The assessees were accused of declaring prices lower than those fixed by the Indian Laminated Manufacturers Association (ILMA) for laminated sheets, with the claim that duty should be payable based on ILMA prices. The Commissioner dropped this demand, agreeing that ILMA prices were suggestive and not obligatory, and that there was no legal provision to apply an assessable value based on association recommendations. Additionally, the demand was barred by limitation as the notice was issued beyond the permissible period.2. Alleged Illicit Manufacture and Clearance Based on Base Paper Consumption Ratio:The notices alleged that the production of laminated sheets by the assessees was less than expected based on the base paper consumed, implying illicit manufacture and clearance. The standard ratio used was 260 grams of base paper per laminated sheet. The assessees contended that this figure was arbitrary and did not account for variations in base paper thickness, use of barrier paper, and wastage. The Tribunal found the Collector's reliance on this ratio simplistic and unsupported by uniform evidence. Previous Tribunal decisions also rejected similar demands based on raw material alone. Consequently, the appeal on this point was allowed.3. Payment of Lower Duty on First-Grade Products Cleared as Second and Third Grade:The department alleged that a significant portion of production was first-grade but was cleared as second or third grade to evade duty. The Commissioner accepted a 70% first-grade production based on a chemist's statement but rejected the ILMA's 80% recommendation. The Tribunal found it unwise to rely solely on an employee's statement without more substantial evidence. The chemist's competence to make such a statement was also questioned. The Tribunal noted that the quality of production could vary and that no testing was conducted to substantiate the department's charge. Hence, this charge was not sustainable.4. Alleged Additional Consideration Received as Commission:The department claimed that the assessees received additional money as commission, which was actually consideration for the sale of goods. The Tribunal noted that unexplained receipt of money alone could not lead to the conclusion of additional consideration unless it was shown that the value declared or the quantity of goods cleared was incorrect. Since the charges of evasion of duty on other grounds were not sustainable, the demand for duty on alleged additional consideration was also dismissed.Conclusion:The appeals by the assessees (M/s. Jay Laminart Limited, M/s. Jay Enterprises, and M/s. Meghdev Enterprises) were allowed, and the demands for duty and penalties were set aside. The appeals by the Department were dismissed.