2005 (1) TMI 612 - AT - Central Excise

Summary

Issues: Duty demand on Weather Strips; Inclusion of tooling cost in assessable value; Imposition of penalties under Central Excise Rules.

The judgment pertains to appeals arising from the Commissioner of Central Excise (Appeals), Ghaziabad's order confirming a duty demand on Weather Strips manufactured by the appellant No. 1. The duty demand of Rs. 18,01,812/- was imposed by including the cost of tooling supplied by customers used in the manufacture of weather strips cleared on payment of duty. Additionally, penalties of Rs. 12 lakhs on the manufacturer and Rs. 1 lakh on appellant No. 2, the financial Controller, were imposed under Rule 209A of the Central Excise Rules.

The appellants did not contest the duty demand, which was upheld. However, the tribunal found merit in the contention that interest and penalties were not sustainable as the appellants believed in good faith that tooling cost should not be included in the assessable value of their products. During the disputed period, there were conflicting judicial decisions, and only in March 2000 did the Larger Bench of the tribunal rule that the proportionate cost of moulds supplied by customers should be included in the assessable value. Citing the case of Mutual Industries Ltd. v. Collector of Central Excise, Mumbai, the tribunal noted the requirement to include the cost of moulds in assessable value. In a similar case, Bright Brothers Ltd. v. CCE, Mumbai II, the tribunal accepted the plea of bona fide belief and set aside interest and penalties. Consequently, appeal No. E/4450/04 was partly allowed, while appeal No. E/4451/04 was allowed in full.