P.D. GUPTA Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The common issue involved in these appeals is the Central Excise valuation of foot wear manufactured in the three factories of Liberty Shoes Group. The factories are located at Karnal in Haryana and Agra and Saharanpur in U.P. The foot wear was liable to duty on ad valorem basis and the appellants were clearing the foot wear from the factories after payment of duty on the basis of ex -factory sale price. The impugned order has held that there was undervaluation of the foot wear in question which led to short levy of Central Excise duty during the period 1991 -96. the order has, accordingly, demanded the duties short levied as well as interest on the amounts short levied and has imposed penalties. The short levies have been held to be the result of suppression of facts which justified the duty demand for the extended period of five years permissible in such cases in terms of proviso to Section 11A of the Central Excise Act. The appellants have challenged the order on merits as well as on the question of limitation.

(2.) On merits, the submission of the appellants is that the foot wear in question were being sold basically through two channels, namely, to show rooms as well as to Distributors. Both Show -rooms and Distributors were wholesale buyers of the goods. The sale price of foot wear to both the channels were the same. The Show -rooms owners disposed of the foot wear purchased by them through retail sale to general public. The Distributors sold the goods to dealers after marking up the price by 15%. It is the contention of the appellants that since the goods were sold at whole -sale prices to unrelated buyers those sale prices satisfied the requirements of the normal sale price under Section 4(i) of the Central Excise Act. They maintain that since the original payments of duty was on the basis of normal price as assessable value, there was no short levy requiring to be recovered under Section 11A of the Central Excise Act and that the entire demand is the result of an erroneous application of the provision regarding central excise valuation.

(3.) The appellants have pointed out that even though reference has been made in the show -cause -notice and impugned order to several aspects covering the trade in the goods by the appellants like recovery of 2% service charges, 4% collection towards Central Sales Tax, extra freight etc. the grounds for confirming the demand is that the appellant had taken certain deposits from their distributors and for this reason the ex -factory sale price cannot be treated as normal value and the correct assessable value is to be arrived at by loading ex -factory price by 15%. The submission of the appellants on the non -maintainability of this addition are many. It has been pointed out that addition of 15% to the ex -factory price would make it equivalent to the sale price of the appellant's distributors to their dealers, which according to the appellants is not justified in the facts of the case at all.