2005 (9) TMI 192 - AT - Central Excise

Valuation (Central Excise) - Manufacture furniture wooden and steel falling under Chapters 44 and 94 of the Schedule to CETA - duty liability - Penalty - HELD THAT - The appellant argued before the Commissioner that the assessable value arrived at by the Commissioner as described above should be taken as a cum-duty price as it is only after arriving at the value as decided in the case of Sri Chakra Tyres Limited v. Collector of Central Excise 1999 (3) TMI 100 - CEGAT NEW DELHI case duty liability should be calculated. The other issues raised in the appeal as well as before the Commissioner are covered against the appellant in their own case as well as in the 2001 (1) TMI 189 - CEGAT KOLKATA and 2003 (7) TMI 155 - CESTAT NEW DELHI . We therefore reject all other contentions raised in the appeal memorandum except the one in regard to computation of proper duty (cum-duty price and computation thereof). For this purpose the matter needs to be sent back to adjudicating authority for proper computation. He shall do so after giving an opportunity to M/s. IS of being heard. On the issue of penalty under Rule 209A it was argued that the appellants did not knowingly concern themselves in dealing with goods which are liable to confiscation and therefore no penalty should be imposed on them under 209A. As against this the Revenue argues that M/s. Omsagar could not have entertained a bona fide belief that furniture is not excisable. They were aware of the fact that furniture ordered by them was dutiable. The said goods were being manufactured in their premises and cleared to them without payment of duty. Since we have come to the conclusion that correct duty liability of M/s. IS has to be worked out taking the sale price as cum-duty price we cannot uphold the penalties imposed on M/s. IS and M/s. Omsagar. The Commissioner therefore has to determine the penalty after arriving at the correct duty liability. Interest u/s 11AB is not demandable as the period in dispute is prior to the introduction of Section 11AB. Thus the order of the Commissioner is set aside and remanded to him for fresh consideration. He would give an opportunity to be heard to all the parties concerned. In the remand proceedings the Commissioner shall keep in mind our observations on the adjustment of penalty imposed on the manufacturer (M/s. IS) from the deposit made by M/s. Omsagar. The appeals are allowed by way of remand in above terms.

Summary

Issues:
1. Duty liability of M/s. IS for manufacturing furniture without payment of duty.
2. Confiscation of furniture, imposition of penalties, and adjustment of liabilities.
3. Penalty imposed on M/s. Omsagar Engineering Pvt. Ltd. under Rule 209A.
4. Adjustment of penalties and duty liabilities between M/s. IS and M/s. Omsagar Engineering Pvt. Ltd.

Issue 1: Duty liability of M/s. IS
The Tribunal found that M/s. IS manufactured excisable goods liable to Central Excise Duty. The Commissioner applied Notification No. 48/87 and deducted repair costs from the assessable value, following the Supreme Court's decision in Sirpur Paper Mills case. The assessable value was determined by adding raw material costs, labor charges, designer fees, and service charges. The method adopted was considered fair and reasonable. The Tribunal rejected other contentions raised by M/s. IS, except for the computation of proper duty, which required a remand to the adjudicating authority for accurate calculation after providing M/s. IS an opportunity to be heard.

Issue 2: Confiscation, Penalties, and Liability Adjustment
The Commissioner confiscated the furniture, allowed redemption on payment of a fine, imposed penalties on M/s. IS and M/s. Omsagar Engineering Pvt. Ltd., and adjusted liabilities. The Tribunal observed that penalties could not be upheld until the correct duty liability was determined based on the cum-duty price. It was noted that interest under Section 11AB was not applicable for the period in dispute. The order was set aside and remanded for fresh consideration, emphasizing the need for proper penalty determination and giving all parties an opportunity to be heard.

Issue 3: Penalty on M/s. Omsagar Engineering Pvt. Ltd.
Regarding the penalty imposed on M/s. Omsagar Engineering Pvt. Ltd. under Rule 209A, the Tribunal considered the argument that they did not knowingly deal with dutiable goods. However, it was concluded that their belief was not bona fide as they were aware of the dutiable nature of the goods. The Tribunal held that the Commissioner erred in adjusting penalties and duty liabilities between M/s. IS and M/s. Omsagar Engineering Pvt. Ltd., emphasizing that penalties should be determined accurately based on the correct duty liability.

Issue 4: Adjustment of Penalties and Duties
The Tribunal highlighted that the Commissioner should not have adjusted penalties or duties between M/s. IS and M/s. Omsagar Engineering Pvt. Ltd. without accurately determining the duty liability. It was emphasized that the penalties needed to be reevaluated after establishing the correct duty liability. The order was remanded for a fresh consideration, ensuring all concerned parties were given an opportunity to present their case. The Tribunal directed the Commissioner to carefully address the adjustment of penalties imposed on M/s. IS from the deposit made by M/s. Omsagar Engineering Pvt. Ltd., maintaining fairness and legal correctness in the process.

This detailed analysis of the judgment covers all the issues comprehensively, providing a clear understanding of the legal intricacies and outcomes of the case.