1990 (9) TMI 176 - AT - Central Excise

Tribunal remands case for transaction analysis, finds notice time-barred, expenses lacking evidence

GENERAL INDUSTRIAL CONTROLS (P) LTD. Versus COLLECTOR OF C. EX.

GENERAL INDUSTRIAL CONTROLS (P) LTD. Versus COLLECTOR OF C. EX. - 1991 (52) E.L.T. 449 (Tribunal) Issues Involved:1. Nature of the distributorship agreement.2. Bar of limitation on the show-cause notice.3. Inclusion of expenses incurred by the buyer in the assessable value.Issue-wise Detailed Analysis:1. Nature of the Distributorship Agreement:The appellants argued that their distributorship agreement with the buyer was on a principal-to-principal basis. The Collector had alleged that the discount given to the buyer was partly to cover expenses that should have been borne by the appellants, thus making the discount includable in the assessable value. The Tribunal analyzed the terms of the agreement, particularly clauses 2.08, 3.02, 4.01, 5, and 7, which indicated that the buyer purchased products on their own account and was responsible for advertisement and sales promotion. The Tribunal directed the Collector to examine the relevant purchase orders and contracts of sale to determine if the transactions were indeed on a principal-to-principal basis. If so, the expenses incurred by the buyer would not affect the assessable value.2. Bar of Limitation on the Show-Cause Notice:The appellants contended that the show-cause notice was barred by limitation, as the department was aware of the distributorship agreements and the 30% discount since 1982. The Tribunal noted that the appellants had consistently informed the department about the agreements and their terms, which were acknowledged by the department through various permissions and classifications. The Tribunal found that the department's allegation of suppression of facts was unsustainable, as the agreements were always within the department's knowledge. Consequently, the show-cause notice was held to be barred by limitation.3. Inclusion of Expenses Incurred by the Buyer in the Assessable Value:The Collector's order included a 14% addition towards expenses incurred by the buyer under clauses 2.01 to 2.10. The appellants challenged this finding, arguing that the expenses were not exclusively related to their products. The Tribunal agreed, noting the lack of specific statistics or evidence to support the 14% figure. The Tribunal set aside the Collector's finding on this point and remanded the case for a limited purpose: to ascertain the nature of the transaction based on the contracts of sale, purchase orders, and price lists.Conclusion:The Tribunal allowed the appeal, remanding the case to the Collector for further examination of the nature of the transactions to determine if they were on a principal-to-principal basis. The show-cause notice was found to be barred by limitation, and the inclusion of 14% expenses in the assessable value was set aside due to lack of evidence.