1994 (1) TMI 155 - AT - Central Excise

Tribunal decision on tape recorder prices valuation and manufacturer determination

The Tribunal upheld the rejection of declared prices for tape recorders, stating that valuation must include all components contributing to marketability. ... Valuation - Sales and related person Issues Involved:1. Valuation of goods for Central Excise duty.2. Determination of the manufacturer.3. Applicability of permissible deductions.4. Imposition of penalties.5. Provisional assessment and limitation period.Detailed Analysis:1. Valuation of Goods for Central Excise Duty:The main issue in these appeals relates to the valuation of tape recorders manufactured by M/s. Dugar Electronics (Dugar) for M/s. Peico Electronics and Electricals Ltd. (Peico). The Collector of Central Excise, Calcutta-II, determined that the products should be assessed based on the prices at which Peico sold them in the wholesale market. The appellants argued that the price lists submitted by Dugar did not include the cost of moulds and other components provided by Peico, which were essential for determining the normal price under Section 4 of the Central Excises and Salt Act, 1944. The Tribunal upheld the rejection of the declared prices, stating that the value must include all components contributing to the marketability of the goods, as per the Supreme Court's ruling in Union of India v. Bombay Tyre International and Texmaco Limited v. C.C.E.2. Determination of the Manufacturer:Peico was alleged to be the manufacturer of the tape recorders because they provided moulds, specifications, and testing equipment, and the products bore the 'Philips' brand name. However, the Tribunal found that the evidence did not support the claim that Dugar was a dummy unit or that Peico controlled Dugar's manufacturing activities. The Tribunal concluded that Dugar was the actual manufacturer, and Peico was merely a customer. Therefore, the Central Excise duty evaded was recoverable from Dugar, not Peico.3. Applicability of Permissible Deductions:The appellants argued that the Collector did not allow permissible deductions such as additional sales tax, turnover tax, and equalized freight. The Tribunal agreed that all permissible deductions should be allowed from the sale price to arrive at the assessable value. The matter was remanded back to the adjudicating authority to re-calculate the differential Central Excise duty after considering these deductions.4. Imposition of Penalties:The Collector had imposed penalties of Rs. 5 lakhs on Peico and Rs. 1 lakh on Dugar under Rule 173Q of the Central Excise Rules, 1944. The Tribunal set aside the penalty on Peico, stating that they could not be considered the manufacturer of the tape recorders. However, the penalty on Dugar was to be reviewed and re-fixed based on the re-calculated amount of Central Excise duty evaded.5. Provisional Assessment and Limitation Period:The assessments in this case were provisional. The Tribunal noted that under Section 11A(3)(ii)(b) of the Act, the relevant date for raising a demand is the date of adjustment of duty after final assessment. Therefore, the demand was not hit by limitation. The adjudicating authority had also found that there was intentional suppression of facts by the appellants.Conclusion:1. The penalty imposed on Peico is set aside.2. Peico is not the manufacturer for the 'Philips' brand tape recorders supplied by Dugar, and the Central Excise duty evaded is recoverable from Dugar.3. The charges at which the tape recorders were supplied to Peico did not constitute the price for determining the assessable value under Section 4 of the Act. These are correctly assessable at the prices at which Peico sold them to 'Philips' authorized dealers, with permissible deductions.4. The differential Central Excise duty evaded, to be paid by Dugar, should be re-calculated after considering permissible deductions.5. The penalty imposed on Dugar needs to be reviewed and re-fixed based on the re-calculated duty.The matter is remanded back to the competent adjudicating authority for re-calculation of the differential Central Excise duty and the quantum of penalty on Dugar. The appeals and Cross Objections are disposed of accordingly.