JUDGMENT
C.N.B. Nair
1. These two appeals relate tot he same issue i.e. valuation of jewellery watches produced by the appellants in their two watch producing divisions, namely, Watch division and Jewellery division. The duty demand in the impugned orders relates to the period for Watch division from Jan’95 to Aug’96 and in respect of Jewellery division from April’95 to August’96.
2. The impugned orders have held that appellants had evaded duty through suppression of facts. Accordingly, the duty short levied has been demanded invoking the provisions for demand under extended period under proviso to Section 11A of the Central Excise Act.
3. The material facts relevant to the case are that during the relevant period, appellants were selling the jewellery watches both at the factory gate and through their agents. Where the sales were from depots, the discount was being given to the wholesale buyers. The appellants paid duty on all the watches cleared by them based on the value applicable to watches sold at ex-factory price on the ground that such price constituted normal price under Section 4(1)(a) of the Central Excise Act. The show cause notices were issued holding that in respect of certain varieties of jewellery watches, there was no sale at the factory gate and therefore the declaration made relating to ex-factory price was a misstatement. The Commissioner has accordingly fixed the normal valuation of the goods based on the depot price.
4. When the appeal came up for argument today, Ld. Counsel representing the appellants stated that in the facts of the case, there was no justification at all for holding that there was mis-declaration or suppression of facts, thereby attracting the proviso to Section 11A(1) of the Central Excise Act for the purpose of raising duty demand beyond the normal period of six months. Ld. Counsel submitted that the Commissioner has reached the finding regarding misdeclaration based on an entirely erroneous understanding of the appellants letters declaring the ex-factory prices. Those letters are letter dated 18.10.95 for jewellery division and letter dated 12.1.95 for watch division. Ld. Counsel submitted that under these letters, appellants declared to the jurisdictional central excise authorities their ex-factory prices. However, it so happened that three was no whole sale buyer at the factory gate in respect of some varieties of watches. He emphasized that several varieties of watches were actually sold to wholesale buyers at those declared prices and this position is also admitted in the show cause notices. he also pointed out that in respect of those varieties of watches there is no demand in the impugned orders. Ld. Counsel pointed out that the price declaration being prospective, always there is a chance that there may not be buyers for some varieties. This in no way could be construed as an effort on the part of the appellants to misdeclare an ex-factory price to the Central Excise authorities, get the goods assessed at that price and evade duty. The Ld. Counsel, therefore, submitted that this was not a fit case for invoking proviso to Section 11A(1) at all and demands raised for the extended period is required to be set aside. He also submitted that the penalty has been imposed in these orders under provisions of Section 11AC. he submitted that those provisions were not attracted at all to the present case, in as much as the period involved in this case is prior to the coming into force of Section 11AC. He also submitted that even otherwise, there was no justification to impose any penalty on the appellants in as much as there was no mis-declaration or under payment of central excise duty with intent to evade duty.
5. As against the aforesaid submissions made on behalf of appellants regarding time bar of part of the demand. Ld. SDR took us to the observations made by the Commissioner as contained in paras 54 & 56 of the Order-In-Original No. 38/97 dated 17.7.97. He pointed out that the Commissioner has specifically taken note of the appellants letter dated 18.10.95 in reaching the conclusion that this was a case of suppression of facts. Similar observation has been made with regard to letter dated 12.1.95 also in Order-In-Original No. 37/97 dated 17.7.97.
6. We have perused the records of the case and have considered the submissions made by both sides. The letters in question informed the Central Excise authorities that jewellery watches would be cleared on wholesale basis as well as to various depots in the country. The letter also enclosed a copy of the Terms of Trade for these jewellery watches. A perusal of the Terms of Trade shows that it is a self-contained document stating various terms regarding sale of the goods on ex-factory basis and depot basis. It is admitted that sale of several varieties of watches took place on ex-factory basis, strictly according to the Terms of Trade. When an assessee is having a consolidated price list for several varieties of goods, it is normal that certain varieties do not find buyers. Such a normal situation cannot be construed as a mis-declaration of terms of trade. In the present case, since the department itself has admitted that several varieties of watches were sold according to the Terms of Trade, we are inclined to agree with the appellants that they had made no mis-declaration with intent to evade duty and that such a contention is not warranted from letters dated 12.1.95 and 18.10.95. There is also no allegation that assessees had any realization over and above the invoice price.
7. In view of the position stated above, we hold that these are not fit cases for invoking larger period of limitation as contemplated under proviso to Section 11A of the Central Excise Act. Accordingly, the demands made for the period in excess of six months are set aside with consequential relief to the appellants. The revised amount of duty shall be worked out by the jurisdictional Dy. Commissioner, intimated to the appellants and adjusted from the amounts already paid by the appellants, including pre-deposit in terms of this Tribunal’s stay order. In case the amount payable by the appellants is found to be more than thee amount already paid, the appellant shall make good the deficiency immediately on receipt of the revised calculation. In case, the pre-deposit is in excess, the same shall be returned to the appellants immediately.
7. With regard to penalty imposed in these cases, it is evident that as the demand related to prior to coming into force of Section 11AC, the proceedings made under that section are illegal and are required to be strucked down. As we have already held that this is not the case involving intentional evasion of duty, no penalty is attracted.
8. Both the appeals are disposed of on the above terms.
(Dictated and pronounced in open Court)