MAZAGON DOCK LTD. Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant has challenged the impugned order dated 29.11.1991 passed by the Collector of Central Excise to the extent that it confirms the demand of the Central Excise duty of Rs. 1,44,53,945/ - (Rupees one crore forty four lakhs fifty three thousand nine hundred and ninety five only) as the duty short paid on the jack -up rig cleared to ONGC, Bombay on 13.4.1988 and imposing a penalty of Rs. 25,00,000/ - (Rupees twenty five lakhs only) under Rule 173 -Q of the Central Excise Rules, 1944.

(2.) THE appellant had cleared one jack -up rig under gate pass dated 13.4.1988 declaring its price as Rs. 45,88,55,418/ - and the price list in respect of this item was also got approved at that price. The Superintendent (Preventive) found that the appellant was entitled to a 30% subsidy (20% from the Government of India and 10% from the said customer ONGC) on the sale price agreed under the contract and that the amount was not included in the assessable value declared by the appellant. By including that amount the assessable value would be Rs. 59,65,12,043/ - and not the amount declared. A show cause notice was, therefore, issued in respect of the differential amount of Rs. 1,44,53,945/ -. The show cause notice also included the item of 13,451 coated pipes which were cleared during 1.3.1986 to 19.8.1989, but this appeal relates only to the demand of the differential duty in respect of the jack -up rig.

(3.) ACCORDING to the appellant, 10% subsidy payable by ONGC had been included in the contract price while 20% receivable from the Government of India did not form part of the assessable value. The Collector of Central Excise on the basis of the material on record found that the fact that a total of 30% subsidy was payable to the appellant had come to light only during the course of investigation, and that the subsidy received/receivable by the appellant had a nexus with the price agreed upon between the parties. The subsidy was payable only due to the manufacturing activity of jack -up rigs undertaken by the appellant. It was held that it cannot be said that the appellant would have agreed for the same price, i.e., the contracted price even if they had not received any subsidy at all. It was observed that in case the appellant were not entitled to any subsidy, it could not be ruled out that they would have sold the jack -up rig at a price higher than the price contracted upon. It was, therefore, held that the entire subsidy of 30% did not form part of the assessable value of the jack -up rigs. In this appeal, the Tribunal had earlier made an order on 8.11.1999 allowing the appeal and setting aside the impugned order in so far as it was against the appellant. In the process, the Tribunal held that there was nothing in the contract, which was entered into between the appellant and ONGC in February 1983, to show that over and above the price fixed thereunder any additional consideration flowed directly or indirectly from the ONGC to the appellant. It was held in paragraph 8 of the earlier order of the Tribunal that, "subsidy paid by the Central government to maintain the ship building yards by the appellant, cannot be considered as consideration flowing from the buyer, namely, ONGC to the appellant". It was also observed that except the price paid by ONGC, as per the terms of the contract, nothing was received by the appellant from ONGC. 4.1 The said order dated 8.11.1999 was challenged before the Hon'ble the Supreme Court in civil appeal No. 3429 of 2000 by the Revenue. By order dated 28.7.2005, the Hon'ble the Supreme Court set aside the earlier order of the Tribunal and has remitted the matter for examination of the two aspects only as indicated in the order. These are: