2007 (5) TMI 103

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.... Engineering Pvt. Ltd. is engaged in the manufacture of machinery and equipment of sugar industry. Based on the tenders inviting bids issued by the sugar manufacturing companies, they bid for supply and installation/erection of the machinery and equipment. At the time of making the bid, as per their say, they prepared a cost estimation of the items manufactured by them based on the then prevailing prices of major inputs such as steel. The supply of goods under the tender covers machinery manufactured by the appellant as well as equipments/parts/components which are bought out from other independent manufacturers and supplied by the appellant as parts of the consolidated supply contract. Under the contract excise duty is payable by the buyer....

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....dit was appointed and based on this investigation a Show Cause Notice was issued alleging that the appellants have undervalued the goods manufactured and supplied by them to the extent of Rs. 23,33,07,506/- and accordingly duty amounting to Rs. 3,73,29,200/- was demanded in respect of such undervaluation. The undervaluation was derived from the fact that while the appellants sold the goods manufactured by them much below the cost of manufacture (about 50%), the selling price of bought out items was enhanced by 86 to 225% and therefore an inference was drawn that a part of the price of manufactured item was recovered in the form of sale price of the bought out items. Investigation also revealed that the unit was getting many of its parts fro....

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.... concept money received would have got spent in it and such cost gets loaded on bought out items and for all such bought outs items the appellants gives performance guarantee and retention money clause are also applicable. Thus even for bought out items, they have to give performance guarantee for which they are not compensated by the sellers of the bought out items. It has also been submitted that once the individual break up of the price of each item is approved by the customers and cannot be changed, the same cannot be disputed in terms of Section 4 being transaction value and the principle of cost of manufacture is totally inapplicable. It has been submitted that while the Commissioner took note of the pleas raised by them, she has fail....