TMI Blog2002 (5) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... per MT on the entire quantity of rails received by them. As per the contract entered into by the party with the Railways, the latter would only pay fabrication charges and excise duty payable on the end products. The company, however, for payment of duty on the end products took into account the material value used in the manufacture of the finished goods and fabrication charges together. It is alleged that the said company did not add to the assessable value so much of the credit of the Central Excise duty availed of on the rails supplied by the Indian Railways for fixing the fabrication charge of the said goods which was not passed on to the Railways resulting in under valuation. It is further alleged that the appellants sold waste and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Act, 1944 and why the Central Excise duty amounting to Rs. 31,50,950/- during the period from July, 1988 to June, 1993 shall not be demanded from them under Rule 9(2) read with Proviso to Section 11A(1) of the Act . They were further called upon to show cause why a penalty should not be imposed on them under Rule 173Q(1) and why their land, building, plant, machinery, etc. should no be confiscated under Rule 173Q(2). 2. After considering the reply of the party, the Commissioner of Central Excise, Calcutta-1 vide his order dated 3-10-2000 confirmed on them the Central Excise duty of the aforesaid amount under Rule 9(2) read with Section 11A(1). He further imposed a penalty of Rs. 3.5 lakhs on them under Rule 173Q and also dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under Section 4(1)(b) of the Act read with Rule 6 of the Rules should be reckoned as it would be reckoned by a man of commerce. We think that such realism must inform the meaning that the Courts give to words of a commercial nature, like cost, which are not defined in the statutes, which use them. A man of commerce would, in our view, look at the matter thus : "I paid Rs. 100/- to the seller of the raw material as the price thereof. The seller of the raw material had paid Rs. 10/- as the excise duty thereon. Consequent upon purchasing the raw material and by virtue of the Modvat Scheme, I have become entitled to the credit of Rs. 10/- with the excise authorities and can utilize this credit when I pay excise duty on my finished product. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the landed cost of the raw material. This action does not lead to any additional consideration for sale of his final product because the amount of credit legally available to him under Modvat Scheme is nothing but his own money which he paid as C.E. duty while purchasing the input. In such a case, if it is seen that the manufacturer has taken total value of raw material to ascertain his assessable value, without setting it off by the modvated duty element, there will be no reason to question the valuation - rather in such case the manufacturer can contend that he has scaled up the value by not arriving at net landed cost of raw material. But the situation is not similar to a manufacturer who gets the raw material as free supply and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the notice, without first paying the duty from his own account while procuring the raw material, is nothing but an additional consideration, which is part of the intrinsic value of the impugned goods." 5. On careful consideration of the above findings, we do not see any warrant to distinguish between two situations viz. where the manufacturer buys his own raw material or where the raw material is supplied to his factory by his principal. The proposition for consideration in both the cases is - what would be the assessable value under the rules in cases where the goods are not sold. This is properly framed by the Apex Court in Para 19 of their above judgment as follow :- "19. With this in mind, we must now determine whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were including in the assessable value of its final products the value of the entire gross quantity of rails including the quantity which became scrap, thus - it is argued - in any event, the value of the quantity becoming scrap was already included in the assessable value of the quantity becoming scrap and there could be no scope for any further inclusion. We have considered these submissions. It is observed that the allegation in the show cause notice is that the Indian Railways allowed to the appellants 5% of the rails as non-returnable scrap; that 5% of the value of the rails allowed to be retained by the appellants is included in the value of the rails since the free cost of rails were supplied in quantity equal to the net requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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