1999 (12) TMI 532 - AT - Central Excise

Tribunal Upholds Duty Payment Period; Emphasizes Component Values & Intent to Evade

The Tribunal upheld the duty payment for a limited period based on the show cause notice dates, emphasizing the importance of including all component ... Valuation - Demand - Limitation Issues:- Duty evasion by not including the value of supplied components in the assessable value.- Validity of the show cause notice period.- Interpretation of Section 11A of the Central Excise Act, 1944.Analysis:Issue 1: Duty EvasionThe case involved a manufacturer, R.H. Industries, producing Axle Beam Assembly for Tractors, with Axle Beam Bushes supplied free by Punjab Tractors Ltd. R.H. Industries did not include the value of these bushes in the assessable value of the Assembly, resulting in lower duty payment. The Tribunal noted that this practice was unsustainable based on precedents like Ujagar Prints v. Union of India and Burn Standard Co. Ltd. v. Union of India, emphasizing the importance of including all component values in the duty calculation.Issue 2: Validity of Show Cause Notice PeriodThe show cause notice issued to R.H. Industries covered a period from November 1990 to July 1995. The appellant argued that for invoking the proviso to Section 11A of the Central Excise Act, 1944, there must be a willful intent to evade duty, which was lacking in this case. The Tribunal agreed, stating that without such intent, the extended period under the proviso could not be invoked.Issue 3: Interpretation of Section 11AThe appellant contended that even if the value of the supplied bushes had been included in the duty calculation, Punjab Tractors could have claimed Modvat Credit, resulting in revenue neutrality. The Tribunal found merit in this argument, stating that in such cases where the manufacturer can claim credit, there is no intent to evade duty. Therefore, without evidence of intent to evade duty, the Department could not justify invoking the proviso to Section 11A.In conclusion, the Tribunal upheld the duty payment for a limited period based on the show cause notice dates, emphasizing the importance of including all component values in duty calculations and the necessity of proving intent to evade duty for invoking the extended period under Section 11A. The appeals were disposed of accordingly, with the duty amounts clarified and instructions given for dealing with Modvat claims.