2004 (9) TMI 189 - AT - Central Excise

Tribunal Upholds Duty Demand, Confirms Valuation Method; Reduces Company Penalty, Sets Aside Executive Penalty.

The Tribunal upheld the department's valuation method for goods cleared to the appellant's Nasik unit, confirming a duty demand of Rs. 94,48,210/- under ... Demand - Valuation (Central Excise) - extended period of limitation - Suppression of facts - Penalty - HELD THAT:- There is no gain saying the fact that the appellant is related person to their Nasik unit though these two units act as different profit centres. The appellant cannot argue that the Nasik unit is a separate class of buyer and therefore that price cannot be compared with the price at which identical goods are sold to others. The case of National Aluminium Co. Ltd., cited supra and relied upon by the appellants also does not come to their rescue, because in the present case we are dealing with related party transactions. The provisions of Section 4(1)(a) clearly rule out transaction between related persons. The department was right in holding that the Nasik unit, being a related person, cannot be treated as a separate class of buyer to whom goods can be sold at a lower price. In the absence of any explanation as to why the goods in question are sold at a lower price to Nasik unit compared to others, the department is right in adopting the maximum price at which the goods are sold during the relevant period. In respect of goods which are exclusively sold to Nasik unit, the department determined the price under Rule 6(b)(ii) of Valuation Rules. We see no reason to find fault with this. We do not find any reason as to why that the maximum price should not be adopted when once it is known that the goods involved therein are identical to the goods sold to the Nasik unit. The Hon'ble Supreme Court in the case of Amco Battery Ltd.[2003 (2) TMI 66 - SUPREME COURT] clearly ruled that when an assessee acts on the bona fide belief that certain goods are not excisable particularly when such goods are modvatable, suppression cannot be alleged. Amco Battery deals with a case where the inputs and the final products are manufactured in the same factory. Further Amco Battery's decision does not lay down the law that in cases where the assessee is entitled to get the benefit of the Modvat scheme there can be no question of suppression of fact. Once the issue of suppression is separately dealt with in the facts and circumstances of a case and a decision arrived at, availability of Modvat credit does not come to the rescue of an assessee. It is clear that when prima facie suppression on the part of an assessee is established the plea of revenue neutrality would not come to his rescue to wipe out the charge of suppression. We therefore reject the plea of the appellant that suppression cannot be alleged in a case where modvatable goods are involved and are consumed by a sister unit in the manufacture of final product. Penalty on senior finance executive - The Commissioner brushed aside the defence of the appellant stating that it was an afterthought. No evidence has been brought out against him leading to the charge levelled against him. We therefore see no reason for imposing any penalty on him under Rule 209A of the Central Excise Rules. Penalty imposed on the company u/s 11AC, we observe that the Commissioner imposed Rs. 94,48,210/- being the maximum penalty u/s 11AC of the Central Excise Act. In the matter of valuation, unlike in the case of clandestine removal, maximum penalty is not called for. We find that the ends of justice are met if a nominal penalty is imposed on the company in this case. Issues Involved:1. Determination of assessable value for goods cleared to the appellant's Nasik unit.2. Allegation of suppression of facts and invocation of extended period of limitation.3. Imposition of penalties on the company and its senior finance executive.Summary:1. Determination of Assessable Value:The appellant company manufactured and cleared vacuum interrupters (VI) tubes to their Nasik unit without filing any price declaration u/r 173C of the Central Excise Rules. The department contended that the price charged to other customers was the 'normal price' and should be applied to the goods cleared to the Nasik unit as per Section 4(1)(a) of the Central Excise Act. For goods not sold to independent buyers, the value was determined u/r 6(b)(ii) of the Central Excise Valuation Rules, 1975. The Tribunal upheld the department's method of adopting the highest comparable price for identical goods and using cost construction for goods sold exclusively to the Nasik unit.2. Allegation of Suppression and Extended Limitation:The appellants argued that the non-filing of price declarations was a procedural lapse and not suppression. However, the Tribunal found that the appellants failed to inform the department about selling identical goods to a related party at lower prices, constituting suppression with intent to evade duty. The Tribunal held that the extended period of limitation was rightly invoked by the department.3. Imposition of Penalties:The Commissioner imposed a penalty equal to the duty amount on the company u/s 11AC and a penalty of Rs. 25,000/- on the senior finance executive u/r 209A. The Tribunal reduced the penalty on the company to Rs. 10 lakhs, noting that maximum penalty is not warranted in valuation matters. The penalty on the senior finance executive was set aside due to lack of evidence against him.Order:(a) The demand of duty of Rs. 94,48,210/- u/s 11A(1) of the Central Excise Act, 1944 is confirmed.(b) Penalty u/s 11AC is reduced to Rs. 10 lakhs.(c) Penalty on the senior finance executive is set aside.Outcome:- Appeal No. E/844/2002 is partly allowed.- Appeal No. E/845/2002 is allowed.