CAPARO MARUTI LTD. Vs. CCE

JUDGEMENT

(1.) THE appellant manufactures 'Sheet Metal Components' (Motor Vehicle) for Maruti Udyog Ltd. The production is undertaken by the appellant as a job work. The sole raw material for the manufacture of the components, 'Cold Rolled Sheet blanks', is supplied by M/s Maruti Udyog Ltd. (MUD, free of cost. Appellants paid conversion charge for the job they carry out. The components so manufactured by the appellants are liable to pay Central Excise Duty, and the appellants were clearing the goods on payment of duty. The duty on components being on ad valorem basis, their assessable value was computed on the basis of cost of production -value of the sheet blanks supplied by the appellants plus the cost of conversion. However, under a Show -cause Notice dated 27.8.2001, it was proposed to reopen the assessment on the ground that the goods were not assessed at the full assessable value. Under the impugned order, the Commissioner has reassessed the goods for the period from September 1996 to February 2000 and demanded a differential duty of over Rs. 80 lakhs. An equal amount of penalty has also been imposed under Section 11AC. The reassessment and demand of short -levied duty have been made by invoking the extended period as permitted under the proviso to Section 11A of the Central Excise Act.

(2.) THE appellant contends that the order is wholly illegal and has been passed on an incorrect view about how the cost of production of goods is to be worked out. It is pointed out that the duty demand has arisen because, while computing value of raw material (Cold Rolled Sheet) used in the manufacture of components, the appellant abated the cost of scrap. The Commissioner has held that this abatement of the cost of scrap is not permissible. The Order has held that "It is not the cost of raw material which have gone into component but the cost of total raw material used including raw material wasted is to be taken into consideration for arriving at the assessable value of the components". On this issue it is the contention of the appellant that the view taken by the Commissioner is wholly erroneous inasmuch as abating realization from the sale of scrap is a normal and permissible accounting practice. Learned Counsel for the appellant has pointed out that in the present case the agreement between MUL and the appellant specifically provided for abatement towards realisation from the sale of scrap while computing the cost of the component. Learned Counsel has also produced Text Book in support of this.

(3.) THE appellants have also contended that, irrespective of the merits of the case, the present demand cannot cross the bar of limitation. It is their submission that proviso to Section 11A was not attracted at all in the facts of the present case inasmuch as there was no suppression of facts as alleged, which circumstance would have enabled the invocation of the proviso. Learned Counsel pointed out that production and clearance of the goods were in terms or agreement with the MUL and the appellant had stated these facts in the Rule 173C declarations filed before the Central Excise Authorities. He referred in this connection to various declarations which had specifically stated, "Prices are mutually fixed and job Purchase Orders are issued by Maruti Udyog Ltd.", "We are converting the Raw Material into Finished Product on job basis and no sale is being made", "We are supplying goods exclusively to MUL on the prices mututally agreed upon taking all expenses, overhead and profits into consideration" "appellants are engaged in the manufacture of excisable goods out of raw material supplied by them, free of cost as mentioned in the invoice under Rule 57F (3)". During the hearing of the case, the learned Counsel for the appellants has submitted that once these facts were stated to the Central Excise Authorities, it was for them to see for themselves whether the assessable value worked out on the basis of cost of production is correct and included all elements. Learned Counsel took us through the component cost working sheets for various years, in order to show that revenue from scrap was one of the items specifically mentioned in those cost sheets and if revenue had any objection to excluding the realisations from scrap as a matter of principle, or the amount deducted on that count, they should have raised duty demands within the normal period of six months provided in the main clause of Section 11A. In any case, it was not open to them to make delayed reassessment by making allegation of suppression of facts.