TaxTMI 
TaxTMI 
2008 (8) TMI 11
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....; Mr. K.K. Mani, Adv. Mr. C.K.R. Lenin Sekar, Adv. JUDGMENT ASHOK BHAN, J. 1. Respondent company is an undertaking wholly owned by the Government of Tamil Nadu. It is engaged in the manufacture of railway wagons and conveyor systems falling under Heading 8605.50 and 8428.00 respectively of the Schedule to Central Excise Tariff Act, 1985. Upon verification of their accounts, it was noticed on 16^th July 1998 that the respondent had entered into a contract, being Contract No.94/RS/PF&EC/954/3 dated 1.12.1994, with the Southern Railways for manufacture and supply of 106 wagons of BTPGLN wagons for an amount of Rs.16,10,90,974/- which was inclusive of cost of steel at Rs.6,65,833/- per wagon. The cost of each wagon worked out to Rs.15,29,724/- (6,55,833 + 8,63,891). The Railways supplied free raw material worth Rs.7 lac per wagon. The respondent paid central excise duty @ 15% ad valorem and cleared 21 wagons to their customer till ....
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....00, confirmed the demand Rs.61,44,084/- towards the interest on advances invoking proviso to Section 11A of the Central Excise Act, 1944 (for short, 'the Act'); the duty demand of Rs.7,560/- towards inspection charges under the proviso to Section 11A of the Act; duty demand of Rs.2,82,155/- involved on the escalation price of the wagons under Section 11A of the Act and ordered that the said amount paid subsequently be appropriated against this duty liability. The Commissioner also imposed the penalty of Rs.20 Lac under Rule 173Q and Rs.34,18,250/- under Section 11AC of the Act. 4. Aggrieved against the said order-in-original passed by the Commissioner, the respondent preferred an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal (for short, 'the Tribunal'), Chennai. The matter came up before a two-member Bench of the Tribunal. 5. Member (Technical) held that so far as the interest on the advances received from the Railways is concerned, it is an admitted position that the respondent has adjusted the value mentioned in the invoice against 50% of the advance amount received from the Railways and that the amount of advance was deposited into the bank. Therefo....
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....0 Lac imposed by the Commissioner under Rule 173Q the Member(T), on the facts and circumstances of the case, particularly because the respondent is a State Government Undertaking and the buyer is Indian Railways, reduced the amount of penalty to Rs.1,20,000/-. Insofar as the penalty under Section 11AC is concerned it was held that the limit of penalty imposable under Section 11AC equal to the duty under Section 11AC is the maximum limit and it is not mandatory in each case that maximum penalty should be imposed. Hence, he reduced the penalty from Rs.34,18,250/- to Rs.11,50,000/-. 10. In short, the Member (T) confirmed the order of the Commissioner except the modification to the extent of reduction in the quantum of penalties. 11. Member (Judicial), however, disagreed with the Member (Technical) on the point as to whether interest on advances should be included in the assessable value. He held that in order to include the interest element, burden is on the Department to prove that advances received had a direct nexus with the price inasmuch as the price had been depressed. Applying the decision of this Court in the case of M/s. VST Industries v. Collector of Central Excise, Hy....
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....is point. He, therefore, allowed the appeal on merits and held that the demand was time barred and set aside the order of the Commissioner. 17. Accordingly, by a majority of 2:1, the appeal of the assessee was allowed. 18. Aggrieved, the Department has come up in appeal before us. 19. It is clear from the above that on the point of inclusion of inspection charges in the assessable value, all the three members have given a common finding that the said charges are to be includible in the assessable value. It is stated that the assessee has not filed any appeal on this point. Thus, the order of the Tribunal has attained finality in this regard. 20. So far as the payment of differential duty on escalation bill is concerned, the assessee in reply to the show cause notice has admitted its liability to pay the said duty and the same has already been paid and pursuant to the finding of the Commissioner, the same has been appropriated against this liability. Tribunal has also recorded the same. There is no dispute on this point also. 21. So far as the interest on advances received from the Railways is concerned, by a majority of 2:1, it has been held that the advances r....