NERVY LOCK CO. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) COMMISSIONER , Central Excise, Kanpur, issued demand -cum -show cause notice, dated 4 -2 -1997. For a proper understanding of the show cause notice and the grounds alleged therein, we read paragraph 2 of that notice : - "And whereas during the scrutiny of the balance sheet for the financial year 31 -3 -1994 it has been observed that the expenses incurred on commission paid to the Agents, advertisements, publicity and replacement of rejected goods within warranty period which should have been included in the assessable value under Section 4 of Central Excise Act, 1944 and are liable to pay duty have not been included in the assessable value of goods as manufactured by the party."

(2.) IN reply to the show cause notice, manufacturer, a SSI unit, raised a contention that they were recovering the price from the dealers without any deduction on account of advertisements, publicity or on replacement of rejected goods. Adjudicating authority rejected the contention raised by the manufacturer as per his order -in -original No. 03/ADDL. COMMISSIONER/ DEM/KC H/97, dated 29 -10 -1997. In that order, he observed, "It is naive to think that an assessee with all the resources at his command and who has taken due assistance from the Chartered Accountant at all levels would pay higher duty merely because of trouble of computation. In my considered opinion the accounting process of the party is faulty which fails to reach even at a proper assessable value and thereby pay correct duty instead of paying higher duty." In this view, he confirmed the demand made in the show cause notice for the year 1992 -93 and 1993 -94. The duty so confirmed was of Rs. 3,84,100/ -. A mandatory penalty of same amount was also imposed under Section 11 AC of the Act. Manufacturer took up the matter in appeal. Appellate Authority, namely, Commissioner (Appeals), Allahabad, by order -in -original No. 104 -CE/KNP H/98, dated 23 -4 -1998, dismissed the appeal. The view taken by the appellate authority was that the manufacturer should have shown separately all the expenses in the assessable value instead of showing them in the gross profits as claimed. His order is under challenge.

(3.) LEARNED counsel representing the appellant submits that the goods manufactured were sold to dealers at a price agreed to between the parties. Out of that price, no amount was deducted under any head. Since the Department has not proved or even alleged any flowback from the buyer to the manufacturer, no differential duty could have been claimed. It is also his contention that no penalty as provided by Section 11 AC could have been imposed on the manufacturer in relation to transactions which took place prior to 28 -9 -1996 on which day Section 11 AC was brought into the Statute Book. He also relied on the decision of a Larger Bench of this Tribunal in Pepsi Foods Ltd. v. Collector of Central Excise, Chandigarh reported in 1996 (82) E.L.T. 33 (Tribunal) for the proposition that advertising expenses incurred by the manufacturer which were not included in the price of the final product should not form part of the assessable value.