TMI Blog2007 (5) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... took up the appeals for disposal. 2. Brief facts of the case are that the appellant Kay Bouvet Engineering Pvt. Ltd. is engaged in the manufacture of machinery and equipment of sugar industry. Based on the tenders inviting bids issued by the sugar manufacturing companies, they bid for supply and installation/erection of the machinery and equipment. At the time of making the bid, as per their say, they prepared a cost estimation of the items manufactured by them based on the then prevailing prices of major inputs such as steel. The supply of goods under the tender covers machinery manufactured by the appellant as well as equipments/parts/components which are bought out from other independent manufacturers and supplied by the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation were conducted in their factory in the year 2001 and subsequently Assistant Director (Cost) Audit was appointed and based on this investigation a Show Cause Notice was issued alleging that the appellants have undervalued the goods manufactured and supplied by them to the extent of Rs. 23,33,07,506/- and accordingly duty amounting to Rs. 3,73,29,200/- was demanded in respect of such undervaluation. The undervaluation was derived from the fact that while the appellants sold the goods manufactured by them much below the cost of manufacture (about 50%), the selling price of bought out items was enhanced by 86 to 225% and therefore an inference was drawn that a part of the price of manufactured item was recovered in the form of sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g bought out involving cost. The said concept may not involve in supply of any item per se but yet as concept money received would have got spent in it and such cost gets loaded on bought out items and for all such bought outs items the appellants gives performance guarantee and retention money clause are also applicable. Thus even for bought out items, they have to give performance guarantee for which they are not compensated by the sellers of the bought out items. It has also been submitted that once the individual break up of the price of each item is approved by the customers and cannot be changed, the same cannot be disputed in terms of Section 4 being transaction value and the principle of cost of manufacture is totally inapplicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re required to be negotiated. The appellants plea that the cost of manufacture by them at the time of placing the order undergoes a change due to escalation in price and was less than the selling price at the time of accepting the bid should have been looked into. The contract should have been studied to know the duration in which the same was required to be executed and whether the estimation of prices takes into account the escalation in cost of raw material between the date of manufacture and date of supply and if not why, if there are escalation clause in the contract to provide for revised price in case there is a delay on account of the customer to accept the delivery of the goods, the extent of the engineering and designing charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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