Aurangabad Electricals Ltd vs Commissioner Of Central Excise & ...

3) M/s. Aurangabad Electricals Ltd. (for short `M/s. Aurangabad EL') are appellants in this civil appeal. They are engaged in the manufacture of Motor Vehicle Parts namely `Magneto Assembly' in their factory at Aurangabad. For manufacture of their final product, viz. Magneto Assembly, they purchase some of the inputs, namely, `Pick-up Coil', com bush, charging coil etc. from M/s. Bajaj Auto Ltd. (for short `M/s. Bajaj') on which appropriate duty is paid by M/s. Bajaj. The appellants had submitted price declarations applicable to Magneto Assembly, which were accepted by the department.

4) The main issue involved in these appeals is the valuation of Magneto Assemblies cleared by the appellants - M/s. Aurangabad EL to M/s. Bajaj and consequent short payment of duty thereon on account of not taking into account the total landed cost of the inputs supplied by M/s. Bajaj.

5) The Commissioner, Central Excise and Customs, Aurangabad (for short `the Commissioner'), issued a show cause notice dated 27.04.2001, inter-alia alleging that the appellants have 2 undervalued the Magneto Assemblies supplied to M/s. Bajaj during the period from April 1996 to December 2000. Accordingly, the appellant, M/s. Bajaj, Mr. Anil Mali, CEO of M/s. Aurangabad EL and Mr. Ranjit Gupta, Vice-President (Materials) of M/s. Bajaj were called upon to show cause as to why the differential duty specified in the notice should not be demanded and recovered under Section 11A of the Central Excise Act, 1944 (for short `the Act') and why interest and penalty should not be imposed under Sections 11AB and 11AC of the Act. The show cause notice was also issued to Mr. Anil Mali, Chief Executive Officer of the appellant, M/s. Bajaj and Mr. Ranjit Gupta of M/s Bajaj were asked to show cause as to why penalty should not be imposed under Rule 209 A of the Central Excise Rules, 1944 (for short `the Rules').

7) After adjudication, the Adjudicating Commissioner passed an Order-in-Original No.04/CEX/2002 dated 25.01.2002, inter-alia holding that the inputs supplied to appellants by M/s. Bajaj were under-valued, and consequently, Magneto Assemblies supplied to M/s. Bajaj have been under-valued leading to 4 evasion of duty. It was also held that M/s. Bajaj was incurring expenditure on account of freight/insurance, loading/unloading and handling charges etc. which, along with profit margins, had not been included in the landed cost of the inputs supplied to appellants. Further, M/s. Bajaj were supplying drawings/designs/specifications free of cost to appellants and upto 20% of the production cost of goods manufactured which were sold back to M/s. Bajaj, was being incurred by M/s. Bajaj. The Adjudicating Commissioner, accordingly, confirmed the differential duty demand of `84,27,889/- under Section 11A(2) of the Act read with Rule 9(2) of the Rules, and penalty of `69,72,104/- under Section 11AC of the Act. The Adjudicating Commissioner also imposed a penalty of `5,00,000/- on M/s. Bajaj, as well as personal penalty of `50,000/- on Mr.Ranjit Gupta, Vice-President of M/s. Bajaj and `25,000/- on Mr. A.R. Mali, Chief Executive Officer of M/s. Aurangabad EL, under Rule 209A of the Rules. The Adjudicating Commissioner also directed the Deputy Commissioner, Central Excise, Aurangabad II division to quantify the interest payable under Section 11AB of the Act and issue appropriate demand notice. 5

8) The appellants and other co-noticees, being aggrieved by the aforesaid order, preferred appeals before the Customs, Excise and Gold (Control) Appellate Tribunal (for short `the Tribunal') under Section 35B of the Act. The Tribunal, by its order dated 20.12.2005 has remanded the matter to the Adjudicating Commissioner for re-computation of excise duty to be levied in the light of the decision of this Court in the case of CCE, Pune v. Dai Ichi Karkaria Ltd., 1999 (84) ECR 4 (SC). In so far as the penalties imposed on the appellants, the Tribunal being of the view that the same is excessive, has reduced the penalty from `69,72,104/- to `10 lakhs, and in so far as the penalties imposed on M/s. Bajaj and the other two appellants, the Tribunal has confirmed the same.

10) The main allegation against the appellants in the show cause notice issued was that the appellants are the manufacturers of Magneto Assemblies and are receiving inputs from M/s. Bajaj, which is the primary consumer of their goods at under-valued landed cost by not including the element of landed cost of inputs incurred on account of Sales Tax, Octroi, Freight, Insurance, loading, unloading and handling charges. The appellants are further undervaluing the clearances effected by them to M/s. Bajaj since the appellants are already receiving the price compensation in terms of inputs at reduced landed cost and thereby they are aiding each other for mutual business interest so that the production cost by both of them kept at minimum and central excise duty is discharged at a lower value.

12) In view of the above, we allow these appeals and set aside the order passed by the Tribunal and remand the matter back to the Tribunal to look into the certificate issued by Mukund Mankar and Co., Chartered Accountant and to determine if M/s. Aurangabad EL had actually incurred the freight charges, loading and unloading charges, consumable overheads profit etc. and whether in the light of this, any of the orders made by the Adjudicating Authority would stand. Since we are remanding the matter for fresh disposal, we also permit both the 9 parties to urge such contentions which are available to them, including the submissions made before us. In the facts and circumstances of the case, parties are directed to bear their own costs.