2023 (6) TMI 692 - AT - Central Excise

Seeking dropping of penalty imposed under Rule 26 of the Central Excise Rules, 2002 - under-valuation of the goods supplied to the Appellants - non-inclusion of value of drawing design supplied by the Appellants free of cost - HELD THAT - Similar issue has come up before this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE JAMSHEDPUR VERSUS TATA MOTORS 2008 (12) TMI 129 - CESTAT KOLKATA where penalty imposed on the supplier of drawing and design free of cost to the job-worker under Rule 26 was set aside - It was held in the case that the escapement of the additional duty for the impugned period was not on account of suppression, misstatement etc., but on account of a mistake of law on the part of the assesses as well as Departmental Authorities. Hence, while holding that the cost of drawings and designs @0.085%, as provided by M/s. Tata Motors, is includible in the assessable value of the components, we hold that the demand for the same can only be sustained for the normal period of limitation. Therefore, following the decision of this Tribunal in the case of Tata Motors Ltd, it is held that penalty under Rule 26 is not imposable on the Appellant. Accordingly, the impugned orders qua imposing penalties on the Appellants are set aside - Appeal allowed.

Summary

Issues involved: Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the Appellants for alleged undervaluation of goods supplied by manufacturer/job-worker.

Summary:
The Appeals were filed by the Appellants seeking dropping of the penalty of Rs.1.00 Lakh imposed on them under Rule 26 of the Central Excise Rules, 2002. The facts of the case involved M/s. Model Heavy Fabrications Pvt.Ltd. and M/s. JMT Auto Ltd. being engaged in the manufacture and clearance of excisable goods, specifically excavator parts. Allegations were made regarding undervaluation of goods supplied to the Appellants by not including the value of drawing & design supplied by the Appellants free of cost. Proceedings were initiated against the manufacturer/job-worker and the Appellants for demand of duty and imposition of penalty. After adjudication, duty was demanded from the manufacturer/job-worker along with interest, and a penalty of Rs.1.00 Lakh each was imposed on the Appellants under Rule 26 of the Central Excise Rules, 2002.

The Appellants did not appear, and no request was received. The Tribunal considered the issue and found a similar case in the matter of Tata Motors Ltd. & Others where penalty imposed on the supplier of drawing and design free of cost to the job-worker under Rule 26 was set aside. The Tribunal observed that the cost of drawings is not includible in the assessable value and that the demand for the same can only be sustained for the normal period of limitation. It was noted that there was no suppression or misstatement, but a mistake of law on the part of the assesses and Departmental Authorities. Following the decision in the Tata Motors Ltd. case, the Tribunal held that penalty under Rule 26 is not imposable on the Appellant. Consequently, the impugned orders imposing penalties on the Appellants were set aside, and the Appeals were allowed with consequential relief.