MECH FORM Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) AS per facts on record, the appellants are engaged in manufacture of Sigma machines out of their own raw material as also on job work basis from the raw materials supplied by the principal -manufacturer. During the relevant period, they were availing the benefit of SSI exemption notification. The appellant's premises were visited by the officers on 13 -12 -2000 and it was found that they were receiving the various capital goods like electric motors, gear boxes, fluid coupling and gear coupling free of cost from their customers by assembling/installation in Sigma machines manufactured by them. As such, the capital goods were being procured under the cover of Annexure -II challans from their customers, who were availing Modvat credit on the same and were sending the same to the appellant under Rule 57S(7) of Central Excise Rules, 1944. A view was entertained that the value of these components received free of cost is required to be included in the assessable value of their final product. Inasmuch as the appellants undervalued the goods by not including the value of the components supplied free of cost, their aggregate value of clearances under SSI exemption notification is required to be computed by said value and the same would cross the exemption limit.

(2.) ON the above basis, a show cause notice dated 25 -6 -2003 was issued to the appellant for demanding duty and imposing penalty. The notice culminated into an order passed by the Assistant Commissioner, Central Excise, confirming demand of duty of Rs. 2,13,902/ - and imposing equivalent penalty under Rule 173Q(1) and imposing penalty of Rs. 10,000/ - each on other appellants. The said order of the Assistant Commissioner was confirmed by the Commissioner (Appeals) and hence the present appeal.

(3.) LEARNED advocate submits that even if the Revenue's case of complete manufacture of goods is accepted, even then the benefit of Notification No. 214/86 -C.E., which allows use of capital goods manufactured on job work basis is to be extended to them. For the above proposition, he relies upon the decision in the case of Flux Engineering Ltd. v. CCE, Noida -, 2004 (178) E.L.T. 853(Tri. -Del.) , laying down that prior to amendment of Notification No. 214/86 -C.E., vide. Notification No. 68/95 -C.E., dated 16 -3 -1995, the machinery, plant, equipment, etc., were excluded. However, with the amendment, the exclusion clause relates only to packaging materials and plant, machinery which were excluded are no more covered in the exclusion clause. The Tribunal has also held that the benefit of Notification No. 214/86 -C.E. not only applied to the input but is also available to the capital goods. Inasmuch as the issue involved in the appeal is directly covered by the said judgment of the Tribunal, we set aside the impugned order and allow the appeal with consequential relief to the appellants.