U.T. LTD. Vs. CCE

JUDGEMENT

(1.) M /s. U.T. Ltd. have two manufacturing units, one at Hosur and the other at Calcutta. The Hosur unit, appellant herein, manufactured Rotary Control Valves [components for hydraulic tipping gears] and stock -transferred the same to Calcutta unit by adopting assessable value in terms of cost construction method under Rule 6(b)(ii) of the Central Excise (Valuation) Rules 1975, during the period 1994 -95 to May 1997, on the ground that there was no wholesale price for these goods. Investigations conducted by officers of the Department found that the Calcutta unit had sold rotary control valves at much higher price than the assessable value adopted by the Hosur unit. It appeared that the Hosur unit was undervaluing the goods with intention to evade payment of duty. Accordingly, a show -cause notice was issued on 28.4.1998, invoking the extended period of limitation, for recovery of differential duty from the appellant and for imposing penalty on them. The proposals of the Department were contested. In adjudication of the dispute, the Commissioner of Central Excise passed the impugned order demanding Central Excise duty of Rs. 14,48,472/ - from the assessee under the proviso to Section 11A(1) of the Central Excise Act and imposing on them penalties of Rs. 4,97,078/ -and Rs. 1,44,000/ - under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944. Hence the present appeal.

(2.) LEARNED consultant for the appellant submits that, out of the 12732 pcs of rotary control valves [on which differential duty had been demanded] transferred from the Hosur unit to the Calcutta unit, only 323 pcs were sold as spares by the Calcutta unit, which amounted to only 2.5% of the quantity cleared by the appellant. Consultant argued that such sale of negligibly small percentage of the goods could not be treated as 'wholesale'. In the absence of wholesale price, according to learned consultant, it was open to the appellant to estimate the assessable value of the goods in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules 1975 read with Section 4(1)(b) of the Central Excise Act. Learned consultant added that duty was correctly paid on the assessable value so determined. It was further submitted that the appellant -unit was not aware of the sale of rotary control valves as spares' by their Calcutta unit and, further, that any duty paid by them was available as Modvat credit to the Calcutta unit. In the circumstances, it was not correct to say that the appellant had suppressed any fact with intent to evade payment of duty. Hence the extended period of limitation was not invocable in this case. The entire demand was barred by limitation. In support of this plea of limitation, learned consultant relied on the Tribunal's Larger Bench decision in Jay Yuhshin Ltd. v. CCE, New Delhi and the Supreme Court's decision in CCE v. Narayana Polyplast 2005 (119) ECR 16 (SC).

(3.) LEARNED SDR referred to the Supreme Court's judgment in Ashok Leyland v. CCE, Madras and submitted that the apex Court's decision was on a similar set of facts and hence squarely applicable to the facts of the instant case. It was also pointed out that the availability of Modvat credit to a sister unit was per se not enough for recording a finding that the proviso to Section 11A(1) of the Central Excise Act was not invocable against the appellant. In this connection, reliance was placed on the Supreme Court's judgment in CCE, Mumbai v. Mahindra & Mahindra .