FAL INDUSTRIES LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of manual typewriters and parts / spares/accessories thereof, plastic components and parts for vacuum cleaners, etc. They have manufacturing units at Chennai and Hosur. During the period January 1997 to March 1998, the Chennai Unit stock -transferred components (rear cover / cord winder assembly) for vacuum cleaners to the Hosur Unit on payment of duty based on assessable value determined by cost construction method and these goods were used captively in the manufacture of vacuum cleaners by the latter Unit. The Department, by investigations, found that the Hosur Unit had sold the said goods in the spares market at a higher rate in wholesale. On the basis of this finding, the Department took the view that, in terms of Section 4(1)(a) of the Central Excise Act, the price at which the Hosur Unit sold the goods in wholesale in the spares market should be adopted for the assessable value of the goods stock -transferred to them from the Chennai Unit. Accordingly, a show -cause notice was issued on 17.11.1998 demanding differential duty of Rs. 10,75,017/ - from the appellants [Chennai Unit] under the proviso to Sub -section (1) of Section 11A of the Act. The extended period of limitation prescribed under the proviso was invoked by alleging that the noticee had deliberately suppressed the value available under Section 4(1)(a) ibid, the price at which the goods were sold in wholesale by the Hosur Unit. The show -cause notice also proposed penalties on the party under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944. Before the original authority, the assessee defended their assessable value determination by cost construction method under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 read with Section 4(1)(b) of the Act, by submitting that any wholesale price was not ascertainable for the goods. The authority rejected this contention after a perusal of the relevant invoices produced by the assessee. It also found that the assessee had not declared to the Department the value available under Section 4(1)(a), which was held to be suppression of vital information with intent to evade payment of duty. Therefore, the adjudicating authority determined the assessable value of the goods on the basis of the price at which the Hosur Unit sold the goods in wholesale in the spares market, and confirmed the differential duty against the assessee by invoking the extended period of limitation under Section 11A of the Act. It also imposed penalties on the assessee under Section 11AC and Rule 173Q. Appeal No. 1067/99 is against this decision of the Commissioner,

(2.) HEARD both sides and considered their submissions. It was submitted by learned consultant that a major part of the stock of goods transferred from the appellant -Unit to the Hosur Unit was consumed captively in the manufacture of vacuum cleaners by the latter Unit and removed on payment of appropriate duty and that the rest of the goods received from the appellant -Unit was used by the Hosur Unit for repairing old vacuum cleaners returned for the purpose by their customers under the provisions of Rule 173H of the Central Excise Rules, 1944. The consultant also submitted that the return of vacuum cleaners by the customers to the Hosur Unit for repairs was duly intimated to the Department in Form D -

(3.) IT was also claimed that the D -3 intimation was evidenced by endorsements made on the relevant invoices issued by the Hosur Unit, Learned consultant submitted that the value addition made by the Hosur Unit to the components used for repairs of vacuum cleaners returned by their customers was adopted by the Department for enhancing the assessable value of the components stock -transferred by the appellant Unit. Such value addition, according to learned consultant, was not contemplated under Section 4(1)(a) of the Central Excise Act. Learned SDR pointed out that this argument of the consultant was without any factual support. We must accept this submission of learned SDR inasmuch as we have not found any evidence of the facts pleaded by the consultant. Four invoices of the Hosur Unit were cited by the Commissioner in his order. A copy of one of these invoices [No 9635175 dated 31.1.1997] is available on record and we have perused the same. There is nothing in this invoice to indicate that it was issued in connection with removal of repaired vacuum cleaners after following the procedure [including D -3 intimation] under Rule 173H. In answer to a query from the Bench, the consultant conceded that the other relevant invoices also did not indicate that the transactions thereunder were in terms of Rule 173H. We find that even the appellants did not choose to plead anything, in this appeal, with reference to Rule 173H. The consultant, along with his written submissions produced copies of a few correspondences between his clients and the Department, but these also did not indicate that the Hosur Unit was following Rule 173H procedure. In the circumstances, we must repudiate the above arguments of the consultant based on facts not even pleaded by his clients. Contextually, we must also observe that, where a consultant or advocate ventures to alter the facts of the case pleaded by his clients, in a desperate bid to win the case, he is acting in excess of his brief. Learned consultant relied on the Tribunal's decision in Commissioner v. Ashok Leyland in support of the cost construction method adopted for valuation of the goods transferred by the appellant -Unit to the Hosur Unit. In the cited case, it was held that assessable value of goods stock -transferred by one of the manufacturing unit of the company to another unit of the same company was liable to be determined by the cost construction method under Rule 6(b)(ii) read with Section 4(1)(b) of the Central Excise Act. But we find that the correctness of the view taken by the Tribunal in the said case was doubted by the Supreme Court in Ashok Leyland v. Commissioner . Further, we note that, in the case considered by the apex Court there was an ascertainable price at which the goods were sold in the market and therefore it was held that there was no question of application of Section 4(1)(b) and Rule 6 of the valuation of the goods. In the present case, it is evident from the records that some of the goods stock -transferred from the appellant -Unit to the Hosur Unit were sold by the latter in the spares market at a higher price and therefore that price would be the normal price under Section 4(1)(a) of the Central Excise Act for the purpose of determination of the assessable vale of the stock -transferred goods. Learned Commissioner has done the valuation correctly. The challenge against the demand of duty fails on merits.