1999 (9) TMI 357 - AT - Central Excise

Tribunal rules in favor of appellants, finding Revenue failed to prove under-valuation, baseless duty demand.

The tribunal ruled in favor of the appellants, finding that the Revenue failed to prove under-valuation of carpets and that the demand for duty was ... Manufacture - Valuation Issues: Valuation under Central Excise law, relevance of laying and fixing charges, demand of duty on conversion of carpets into rugs, demand of duty on shaping charges, justification for demanding duty, legality of penaltiesValuation under Central Excise law:The case involved manufacturers of carpets who also sold at contract prices to bulk consumers. The Revenue authorities alleged that the contract prices were deliberately lowered to evade duty, and demanded duty on an enhanced value. The appellants argued that contract prices were acceptable for valuation under Central Excise law and laying and fixing charges should not be considered in assessing the value of carpets. They presented detailed cost accounts showing that the amount collected for laying and fixing charges was actually spent on those activities. The Central Excise Cost Accountants confirmed this, and the difference in amounts was due to different methods of cost computation, not evasion. The tribunal found that the Revenue failed to prove under-valuation, and the demand for duty was baseless.Demand of duty on conversion of carpets into rugs and shaping charges:The Revenue authorities also demanded duty on the conversion of carpets into rugs for cars and on shaping charges. The appellants argued that these activities did not amount to manufacturing and therefore were not liable for duty. They cited departmental clarifications and a substantial volume of case law to support their position. The tribunal agreed that if goods were not manufactured due to certain activities, there was no basis for levying duty. Consequently, the demand for duty on these activities was deemed unjustified.Legality of penalties:Given the lack of legal basis for the duty demands, the tribunal concluded that there was no justification for penalties either. The appeals were allowed, and the impugned order was set aside. The tribunal found no evidence of mala fide intentions on the part of the appellants and emphasized that duty under Central Excise law is levied on the manufacture of goods. Since the activities in question did not result in the manufacture of new goods, the duty demands were deemed unfounded.