Tribunal Upholds Duty Demand and Extended Period for Intentional Non-Payment

The Tribunal rejected the appeal regarding the inclusion of the cost of free supply material in the assessable value of the final product, the conversion of rails into railway switches and crossings constituting manufacture, and the demand of duty beyond the normal period. The Tribunal upheld the demand for duty, invoking the extended period due to the appellants' intentional actions of not paying duty on the full intrinsic value despite being aware of the legal position.

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Issues:
1. Inclusion of cost of free supply material in assessable value of final product.
2. Whether conversion of rails into railway switches and crossings amounts to manufacture.
3. Barred by limitation - demand of duty beyond normal period.

Issue 1: Inclusion of cost of free supply material:
The appellant firm, engaged in manufacturing Railway Switches and Crossings, disputed the inclusion of the cost of free supply material by Railways in the assessable value of the final product from 7-4-1987 to 31-8-1991. The legal issue was already settled in the appellant's own case and supported by a Supreme Court judgment. The contract between the appellants and Railways clearly indicated the final product's excisability, thus rejecting the appellant's contention.

Issue 2: Manufacture of railway switches and crossings:
The appellant argued that converting rails into switches and crossings did not amount to manufacturing as they were fabricating the products based on Railway's drawings. However, the drawings and contract terms referred to manufacturing, and the final product was excisable, leading to the rejection of this argument.

Issue 3: Barred by limitation - demand of duty:
The appellant contended that the demand of duty was barred by limitation as the show cause notice was issued beyond the normal period. They argued that the Department was aware of their duty payment practices since 1987 and that there was no intention to evade duty. However, the Tribunal found that the appellants continued to pay duty only on fabrication charges despite an adjudication order requiring payment on the full intrinsic value. The Tribunal held that the extended period was rightly invoked by the Department due to the appellants' intentional actions, upholding the demand for duty.

In conclusion, the Tribunal rejected the appeal, upholding the demand for duty beyond the five-year period, as the appellants had not acted with clean hands and were aware of the legal position but continued to pay duty only on fabrication charges.

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