HERO HONDA MOTORS LTD. Vs. CCE, DELHI-III

JUDGEMENT

(1.) APPELLANT is manufacture of motor cycles. Their unit at Gurgaon cuts steel sheets into body frame right and left.Such parts, so cut, were then transmitted to the unit at Dharushera for further processing to bring out motor cycles.The sheets cut into body frame right and left were subjected to payment of duty at the hands of the manufacturer fixing its value at cost of material plus 4 to 5% profit. Show cause notice dated 15.11.2000 was issued demanding differential duty amounting to Rs.38,97,830 in relation to goods produced on Gurgaon Unit during the period from 1.4.97 to 31.3.2000. In reply to show cause notice it was contended that the Department was justified in loading the value of the parts produced in Gurgaon Unit by adding the profit of the entire Company. It was the assessee's contention that the profits that could have been earned on the parts produce din Gurgaon Units alone could be added to its value for reassessment of central excise duty. This contention was based on Rule 6(b)(ii) of the Valuation Rules. It was also contended that cutting of steel sheets into parts of body of motor cycles will not amount to manufacture. Even though they were paying duty on such parts as stated earlier, adjudicating authority, namely, Commissioner of Central Excise, Delhi III as per Order -in -Original No.5/2001 dated 21.3.2001 confirmed penalty of the like sum under section notice. He also imposed penalty of the like sum under section 11AC of the Central Excise Act. Assessee was also directed to pay interest at the rate of 24% on the duty charged on him under section 11AB of the Central Excise Act. This order is under challenge in this appeal.

(2.) ALONG with the appeal, appellant has moved application for stay of operation of the impugned order as also to waive the pre -deposit as contemplated by Section 35F of the Act.We heard Learned Counsel representing the appellant and the Learned Departmental Representative.According to the Depatemental Representative the parts with which we are concerned in this appeal are not marketed and so the profit of the unit making the final goods, namely cycles in this case, should be added to the value of these parts for the purpose of assessment.

(3.) A reading of Rule 6(b)(ii) makes it clear that the assessing authority can add only the profit which the assessee would have normally earned on the sale of such goods. Such goods made mention of in the rule can refer only to the particular goods on which duty is sought to be levied. In the instant case, it is the metal pieces cut to size for being used on the right side and left side of the motorbikes. The profit that could be earned on these goods and these goods alone, prima facie, it appears, can be added to its cost for levying duty. This view is supported by Larger Bench decision of this Tribunal in Raymonds Ltd. vs. Commissioner of Central Excise, Aurangbad 2001 (43) RLT 911.