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TMI Blog2000 (11) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... timate use in the manufacture of Motor Vehicles to be cleared on payment of duty. The appeals also involved determination of the question whether a manufacturer can be charged with the allegation of attempting to evade payment of duty when the entire exercise is admittedly revenue neutral. 3. The appellant is inter alia engaged in the manufacture of Motor Vehicles, I.C. Engines and Motor Vehicle parts. For the said purposes, the appellant has two factories, one located at Pune and the other located at Pithampur in M.P. At its factory at Pune, the appellant received various raw materials and manufactured motor vehicle parts. The portion of the production of the motor vehicle parts, I.C. Engines were sold in the market and the remaining portion was cleared on payment of duty to another factory of the appellant at Pithampur. After receipt of the goods at Pithampur, the appellant takes Modvat credit in respect of duty paid and utilised such credits while paying duty on motor vehicles. 4. During the period 1-3-1989 to 16-3-1995 clearances of goods from one factory to another factory of the same manufacturer which were intended to be used in the manufacture of final products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o filed along with R.T. 12 Returns by the appellant in the month of March, 1995. Various declarations have been filed by the appellant showing that in respect of inter-factory transfer showing the price of engine transferred at a price of Rs. 45,000/-. The declarations were filed on 26-5-95. Stock account as per Rule 57G was filed for the period 23-8-1995 to June, 1997. The Assistant Commissioner by his Memorandum dated 4-10-95 disposed of various declarations. 6. A Show cause notice was issued on 29-12-1997 on the ground that the appellant should have adopted the sale price of E-2 Type engine and the appellant ought to have paid more duty at Pune. In another words, the Department was of the view that even when there is price available under Section 4(1)(a), recourse should be made to section 4(1)(b). The show-cause referred to above was for the period 13-6-95 to 31-8-97. On 6-5-98, a corrigendum was issued demanding duty at Rs. 6,69,17,55/- instead of Rs. 6,41,67,050/-. Three more show cause notices were issued. They are as under : Sr. No. Show cause notice date Period Amount 1 24-3-98 1-9-97 to 31-12-97 Rs. 64,14,116.12 2 22-5-98 1-1-98 to 31-3-98 Rs. 41,05,654. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Lodha, Advocate, appeared for the appellants. Shri K.L. Ramteke, D.R. appeared for the Department. 9. Shri Lodha described graphically the nature of the production made at Pune and Pithampur factories. He described what is described in the paragraphs stating that the raw materials were used at Pithampur factory for manufacturing I.C. Engines and parts. They were exempted from duty because of existence of Notification No. 217/86 which was sent to Assembly Section and thereafter cleared the goods namely vehicles were cleared on payment of duty. Some of the goods namely I.C. Engines and parts were sold in the market. Some of the I.C. Engines and parts were transferred to Pithampur factory and they were exempted from duty for the period from 1989 to 1995 and the appellants were followed Chapter X procedure. Shri Lodha explained that from 16-3-95 whatever duty was paid at Pune, the credit was claimed at Pithampur on the basis of payment. The entire exercise is revenue neutral. He drew the attention to the following propositions of Law : (i) In respect of the value of the goods, the number of transactions made at the factory gate is immaterial as long as the genuineness of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Transformers (The excise revenue neutral. No intent could be inferred) 10. Shri Ramteke in replying to the above arguments adopted the reasoning of the Adjudicating Authority. 11. We have considered the rival submissions. From the narration of the facts and arguments, it will be clear that the appellant manufactures not only Motor Vehicles but also I.C. Engines and Motor Vehicle parts at Pune factory as well as at Pithampur factory. The I.C. Engines manufactured at Pune factory were consumed in the factory itself and such goods are exempted from duty in terms of Notification 217/86 being a captive consumption. The finished products namely Vehicles are cleared on payment of duty. Such of those I.C. Engines which were removed to Pithampur factory were exempted from taxation in view of the provisions of Chapter X. This is the position prevailing from 1989 to 1995 i.e. upto 15-3-95. On and from 16-3-95, for the I.C. Engines cleared from Pune factory to Pithampur factory, the appellant paid duty and claimed credit at Pithampur factory. For the purposes of valuation, Department stated in para 2 of Show-cause Notice dated 29-12-97 are as follows : "Whereas it appears that I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating Authority at para 12 of the order has held as follows : "In the automobile industries, power of Engines in BHP is a standard recognized engine capacity. As per the assessee, dealers' price excluding Excise Duty and other prices" of D-301 E2 Engine of 46 BP is listed as Rs. 61,000/-. Engines of higher capacity such as 65 BHP and 72 BHP, no one will sell for Rs. 45,000/-. In short, it is not true reflection of normal price of the engine. That is why the price of Rs. 71,000/- and Rs. 75,000/- respectively of 65 BHP and 72 BHP can only be the normal price." 12. The above observations and findings of the Adjudicating Authority cannot be accepted. The way in which the Show cause notice is proceeded does not state that the price declared is not the normal price of the engine or prices declared is not true reflection of the normal price of the engine. It does not state specifically in the Show cause notice that engines of higher capacity would be sold only at higher price nor does the show-cause notice state that the engines have higher capacity. There are other commercial consideration which has been received by the assessee in some other transaction. The allegation is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the facts that they have violated the law and paid lesser excise duty after taking lower assessable value, it could be only due to the indirect financial accommodation which they would have derived if they pay duty at a lesser value for the Engines transfered to their Pithampur factory because there would be an inevitable time-gap between the clearance of the engines on payment of duty at Pune and its utilisation at Pithampur, it could only be this bait of a small financial accommodation which prompted the assessee to take a devious short-cut which involved serious violation of Section 4 of the Central Excise Act and Rules particularly Rule 6b(1)or 6b(2) of the Central Excise Valuation Rules as the case may be". In our opinion, this finding is not correct. The grounds of appeal, in the ground - N it has been stated that the duty paid is Rs. 234/- crores. The interest saved would come to Rs. 46,000/-. This is on the basis the price taken by the Department is Rs. 72,000/- and the appellants Valuation is Rs. 45,000/-. The calculation has made on the basis of average time gap taken at maximum one month. The interest comes 0.8%. We feel that the assessee, in our view, in the normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicate that the extended period can be invoked only when there is contumacious conduct of the assessee is present which is delineated in the proviso to Section 11A of the Central Excise Act. Here all the declarations and RT 12 Returns were filed. These were reflected in Memorandum of the grounds of appeal at Annexures C, D, E, F, G, H, I, M, N and O. Various annexures do show that periodically the appellant had been in touch with the Departmental Authorities and the Authorities did not think fit to rebut the stand taken by the assessee. In para 18 of the Adjudicating Order, the Commissioner has observed that the assessee has evaded duty by means of wilful misstatement and suppression of fact in a very calculated manner to fail to declare the correct assessable value to the Department and therefore he was invoking the larger period of limitation. 18. We are of the view that in view of what is stated in the previous paragraph in the instant case larger period of limitation cannot be invoked, especially when there is absence of findings relating to intention to defraud especially when there is a case of revenue neutrality. Even if it is valued at higher rate at Pune factory, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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