TMI Blog1976 (7) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioners, cotton nylon duck is also one. It is made out of nylon and cotton and is used in the manufacture of T.V.C. belting which in turn is used as a conveyor belt by the Neyveli Lignite Corporation and in coal mines. This product is manufactured in accordance with the specifications and requirements of a few customers among whom Dunlop India Ltd. (hereinafter referred to as Dunlop) and National Rubber Manufacturers Ltd. (hereinafter referred to as N.R.M.) are the principal purchasers. The said companies used to enter into contracts with the petitioners for the supply of nylon cotton belting duck. The percentage of nylon content in the belting duck will range between 10 and 60. The nylon was supplied by Dunlops and it was impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned by the Superintendent, Central Excise. Since 2-12-1970, the petitioners were adopting the procedure and accordingly assessments were made and completed till 30-6-1974. 3. On 2-7-1974, the Superintendent of Central Excise sent a letter to the petitioner calling for the price list and the petitioners replied on the same day. However, on 4-7-1974, the Superintendent wrote a letter temporarily withdrawing the approvals accorded to the petitioners with reference to the above said notification. A show cause notice was issued on 28-9-1974, which is the subject matter of the present with petition calling upon the petitioners to show cause as to why a penalty should not be imposed on them under Rule 173Q of the Central Excise Rules as amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to state that there is any violation of the conditions adumbrated in the notification. The price of nylon supplied by Dunlop and N.R.M. cannot be included in the price, since the petitioners are not the owners. 7. A common counter affidavit has been filed by the Assistant Collector (the 2nd respondent) stating that with reference to the supply of nylon, it is incorrect to state that it was not the property of the petitioners. The petitioners became the owner of the goods in terms of Rule 3, since it is manufacture that is relevant, and they are naturally responsible for the discharge of Central Excise duty on the finished (manufactured) duck fabrics. Therefore, the cost of nylon ought to have been declared and included in the price which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by them towards the manufacture of cotton nylon duck, namely, the actual value of cotton plus the conversion charges and other incidental charges were shown as prices. Nor could it be said that there is a violation of condition 5, in that there was no other understandings except to manufacture these goods in accordance with the specifications. In any event, there is a prejudging of the matter in so far as the concession was withdrawn even as early as 2-12-1974, before the petitioners could file their reply to the show cause notice which was done on 7-12-1974. Further, the show cause notice dated 27-2-1975 suffers from the same defect and in any event, it is clearly beyond the period of one year contemplated under Rule 10 of the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s able to get indigenous nylon which was supplied to the petitioners mills for the purpose of manufacturing cotton nylon duck. What they would be entitled to charge as a sale consideration, would be, as correctly pointed out by them, the value of cotton which went into the manufacture and the actual charges of conversion of nylon and any other incidental charges relating thereto. It is admitted that these were reflected in the price list which alone form the consideration for the sale. Therefore, there is absolutely no violation of conditions 3, 4 and 5 of the notification. Merely because the attorney of the Mills took a stand that the contracts were only for charges for work done, it does not mean that statement will be conclusive and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, is that there has not been any clandestine removal at all. At every point of time, the removal was checked and countersigned by the authorities. All of a sudden to say as if there was a clandestine removal in that the value of the price of nylon had not been included is not only unreasonable, but seems to be without any justification whatsoever. 13. A faint argument was urged on behalf of the department that the freight charges and the handling charges have been charged from buyers in addition to the price mentioned in the contract, but the same had not been included in the contract price taken as an assessable value and therefore the price as shown is not correct. This argument ignores the fact that the contract itself mentioned 'fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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