COMMISSIONER OF CENTRAL EXCISE Vs. MYSORE KIRLOSKAR LTD

JUDGEMENT

(1.) The instant appeal is directed against decision dated January 25, 2002 rendered by the Customs, Excise and Gold (Control) Appellate Tribunal, South Zonal Bench at Banglore, in Appeal No. E/744/95 whereby the or der dated September 8, 1995 passed by the Commissioner of Central Excise, Belgaum, confirming the demand of duty of Rs. 7,41,750/- and imposing penalty of Rs. 75,000/- on the additional amount of consideration of Rs. 43,00,000/-received by the respondent for the preparation of designs, drawings, patterns, jigs, etc, is set aside.

(2.) The respondent, a company incorporated under the provisions of the Companies Act, 1956 was manufacturing machine tools, their accessories, high grade cast ings, pollution control equipments and other incidental and ancillary equipments. It owned and operated a main machine manufacturing factory at Harihar. It used to accept orders to manufacture engineering machines as per the drawings, patterns, jigs, fixtures and tools etc. developed by it. The respondent entered into such an agreement dated May 10, 1991 with ITC for manufacturing the machines. The agreement stipulated that the machines would be manufactured as per the speci fications, prototype drawings and patterns prepared by it and approved by ITC. As per the agreement, the price of the machines was to be stipulated by ITC in orders to be placed upon the respondent-company. For the agreement in question, the respon dent was paid a sum of Rs. 43 lakhs. The said sum was accounted as other income in the accounts and balance sheet of the respondent.

(3.) The Commissioner of Central Excise, Belgaum, issued a notice calling upon the respondent to show cause as to why duty of Rs. 7,41,750/- on the additional amount of consideration of Rs. 43 lakhs received by the respondent for the Supply of machinery items be not levied under Rule 6(2) of the Central Excise Rules, 1944. The respondent gave reply to the said notice. However, the Commissioner of Cen tral Excise, Belgaum, vide Order-In-Original No. 23/95, dated September 8, 1995 confirmed the entire duty demanded and also imposed penalty of Rs. 75,000/- upon the respondent under Rule 173-Q of the Central Excise Rules.