TaxTMI 
TaxTMI 
TaxTMI 
2002 (7) TMI 147
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....Section 11AC of the Act for the various contravention alleged. 2.The appellants are an Undertaking wholly owned by the Government of Tamil Nadu. They are engaged in the manufacture inter alia of Railway wagons falling under Chapter Headings 8605.50 and 8428.00 of the CETA, 1985. It was found on verification of their accounts that the appellants have entered into a contract with the Southern Railways for the manufacture and supply of 106 wagons of BTPGLN wagons vide contract No. 94/PS/PF& EC/954/3, dated 1-12-94 for an amount of Rs. 16,10,90,974/- which is inclusive of cost of steel at Rs. 6,65,833 per wagon. The cost of each wagon including the cost of steel worked out to Rs. 15,29,724 (6,55,833 + 8,63,891). The Railways have given free supply of raw materials worth Rs. 7 lakhs per wagon. The appellants have paid Central Excise duty @ 15% ad valorem and have cleared 21 wagons to their customer till 16-7-1998. It was also noticed that the appellants have adjusted value mentioned in the invoices against 50% of the advance amount received from their customers. They have also collected an amount of Rs. 2400/- per wagon by way of inspection charges. This amount was not included in the ....
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.... the decision of the Tribunal in the case of CCE, Mumbai v. Netel Chromatographs reported in 1998 (100) E.L.T. 111 wherein it was held that the price was a contracted price between the buyer and the seller and that has no relevance to the advance taken. (b) It is not for the Revenue to see as to how the advance received has been used and what is to be seen is whether because of the advance taken, there was any lowering of the price and 50% of the price taken as advance cannot be taken to be abnormally high. (c) The appellants are an undertaking wholly owned by the Govt. of Tamil Nadu and the buyer is the Indian Railways and hence there cannot be any motive to depress the price. (d) Longer period of limitation cannot be invoked in this case in view of the decisions in the case of Tamil Nadu Housing Board [1994 (74) E.L.T. 0009 (S.C.) = 1994 (55) ECR 7 (S.C.)] and various other decisions such as CCE v. Chemphar Drugs [1989 (40) E.L.T. 276 (S.C.)], Padmini Products v. CCE, Bangalore [1989 (43) E.L.T. 195 (S.C.) = 1989 (25) ECR 289 (S.C.)] and in the case of ....
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....e learned Commissioner has passed a well reasoned order. He particularly invited our attention to his finding as to how the advances received influenced the price decision. He submitted that the appellants have not shown that the interest on the advances was not adjusted against the price. He has submitted that the interest on advances received are includible in the assessable value. He also referred to the conclusion arrived at by the Commissioner in regard to retention of the duty paid goods, collection of inspection charges and invocation of longer period of limitation. He submitted that in view of the well reasoned order passed by the Commissioner, the appeal should be dismissed. 6.We have carefully considered the submissions made before us by both the sides and gone through the case records including the contract as amended vide Govt. of India, Ministry of Railway, New Delhi letter dated 8-3-1996 which is available on page No. 82 of the paper book. We find that the contract sets out various conditions including liability of payment of excise duty, and Sales Tax, etc. According to the terms of the Contract, Central Excise duty and Sales tax statutorily leviable shall be reimbu....
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....l box India v. CCE, Madras reported in 1995 (75) E.L.T. 449 (S.C.) has held that "it has to be appreciated that if Ponds had not advanced these amounts, the appellant would have been required to borrow these funds from the Bankers, etc., for purchasing raw materials and that the interest payable would then have entered the cost of manufacture and consequently the sale price of the goods........". In the present case, it is an admitted fact that the appellants have received huge amount of advance from their Customer and they have utilized the same for their working capital and repayment of loan. In the present case before us, it is on record that the appellants have adjusted the value mentioned in the invoice against 50% of the advance amount received from the Railways. Therefore it can be logically concluded that they have saved huge amount by way of interest. Therefore, we are of the considered opinion that the interest on advance is includible in the assessable value and longer period of limitation in term of the proviso to Section 11A(1) has been correctly invoked in this case as the appellants have held back information with regard to the contract entered into by them with the ....
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..... We uphold the finding of the Commissioner in this regard. Coming to the last charge i.e. imposition of penalty for various contraventions alleged against the appellants, we find that the Commissioner has imposed penalty of Rs. 20,00,000/- on the appellants under Rule 173Q of the CE Rules which is harsh and excessive and needs to be reduced in the facts and circumstances of this case more particularly because the appellants are a State Govt. Undertaking and the buyer is the Indian Railways and they have supplied the goods in accordance with a contract though the appellants had not brought to the notice of the department the existence of a contract. Therefore, we are inclined to think that interests of justice would be served if the penalty is reduced to Rs. 1,20,000/- (Rupees One lakh twenty thousand) and we order accordingly. As regards penalty under Section 11AC is concerned, in view of the fact that the appellants happen to be a Govt. of Tamil Nadu Undertaking and the Buyer of the goods was Indian Railways as well as N.L.C. which is a Govt. of India Undertaking, we feel that there is a need for reduction in the quantum of penalty. We also find that the Tribunal in the case of ....
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....98 which considers the judgment of the Supreme Court in the case of V.S.T. Industries Ltd. and specifies that the department has to establish that advance in question had a nexus with the sale price of the excisable goods. Further, reliance have been made on the following judgments :- (1) Mukund Ltd. v. CCE - 1999 (113) E.L.T. 316 (2) CCE v. Chemical Valves Pvt. Ltd. - 1999 (113) E.L.T. 574 (3) Western India Ceramics Pvt. Ltd. v. CCE - 2001 (130) E.L.T. 714 (4) Mc.Nally Bharat Engg. Co. Ltd. v. CCE - 2001 (132) E.L.T. 353 (5) CCE v. Rattan Hammers - 2000 (36) RLT 492 (6) CCE v. Lakshmi Engg. 2000 (37) RLT 270 11.With regard to inspection charges, the appellants contend that Railway Board nowhere specifies that the cost of addition of third party inspection would have to be paid by the wagon manufacturer. They stated that any third party inspection carried out at the instance of the buyer in addition to the normal inspection of....
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....ird party inspection carried out at the instances of the buyer in addition to the normal inspection of the assessee is not includible in the assessable value in terms of erstwhile Section 4 of the Act. In this regard, the three citations have been relied which are noted above. 17.I have gone through these judgments which are squarely applicable to the facts of this case. Respectfully following the same, I hold that the inspection charges are required to be added in the assessable value. 18.The department had full knowledge of the price and the advances received by the appellants. By Order-in-Original No. 71/96, dated 15-10-96 the AC had noted about the advances received by them and also held that advance had no nexus with the contract and dropped the proceedings. Therefore, it cannot be said that there was suppression of facts requiring the invocation of larger period. The Nizam Sugar case is not applicable to the case as the ratio does not touch upon the aspect pertaining to the information already available with the department to allege suppression of facts. The same is distinguished. Appellant succeeds even on the ground of time bar. Thus the appeal is allowed in the above ter....