By TIOL News Service

NEW DELHI, MAY 31, 2017: THE appellants are manufacturing "pens and writing instruments" under the brand names of 'Luxor', 'Pilot' and 'Parker' and selling to M/s. Luxor, who in turn sell the same to consumers through the network of distributors/ wholesale dealers. Since M/s. Luxor and appellants are inter-connected undertakings, appellants were discharging duty liability by taking into account the retail sale price charged by Luxor and by doing backward calculations after claiming deductions on account of discounts, taxes and duties. Incidentally, pens and writing instruments are not covered for MRP based assessment. The appellants were also claiming benefit of exemption under Notfn 4/97-CE , 5/98-CE , 5/99-CE, 06/2002-CE etc. in terms of which pens of value less than Rs. 100/-, Rs. 200/- were exempted from duty.

An objection was raised by the Audit party that the appellants, by making deduction towards cum-duty price, were collecting duty from their customers but not depositing the same with government. A SCN dated 31.01.2008 was issued invoking the extended period of limitation and proposing to demand Central Excise duty with interest and penalty, alleging that in respect of final products which are exempted, claiming deduction on account of cum-duty price was not correct. The CCE, Delhi upheld the allegations leveled in the SCN.

The appellant is before the CESTAT and submits that the adjudicating authority had erred in placing reliance on the case laws of Bata India Limited - 2002-TIOL-207-SC-CX and Amrit Agro Industries Limited - 2007-TIOL-244-SC-CX for the reason that these judgments were delivered in the context of Section 4 which was prevalent during the period 1975 to 30.06.2000. Inasmuch as since the present dispute is in the context of Section 4 as it stands with effect from 01.7.2000, after the introduction of transaction value and which provisions are similar to that prevalent prior to 01.10.1975, the decision of Bata Shoe Company - 2002-TIOL-294-SC-CX will be directly applicable to the facts of the present case allowing such computation of value as made by the appellant. The appellant also raised the ground of limitation as well as the ground that the order of the AA had traveled beyond the SCN in the sense that s.11D was not at all invoked in SCN but the AA had confirmed the demand by invoking s.11D of the CEA, 1944.

The Bench observed -

+ We find that the above decision (Bata Shoe Company - 2002-TIOL-294-SC-CX) is applicable to the present case and supports the calculation attached by the appellant to determine the value .

+ The appellants have been filing the price declarations from time to time during the period when they were required to do so. We note that the method of calculation of value has been fairly spelt out in such declarations. Since all the relevant facts were in the knowledge of the department , we are of the view that the extended period of limitation is not applicable.

+ We have considered the relevant show cause notice and find that the ground of Section 11D has not been raised in the relevant show cause notice and consequently, the impugned order has travelled beyond the scope of show cause notice and is liable to be quashed.

Holding that there is no merit in the impugned order, the same was set-aside and the appeal was allowed.

(See 2017-TIOL-1812-CESTAT-DEL )