1997 (5) TMI 291 - AT - Central Excise

Issues Involved:
1. Alleged manipulation of break-up figures.
2. Inclusion of bought-out items in the assessable value.
3. Excise duty liability on plants and equipment.
4. Admissibility of Modvat credit.
5. Validity of the show cause notice and the impugned order.

Detailed Analysis:

Alleged Manipulation of Break-up Figures:
The show cause notice alleged that the appellant manipulated the break-up figures of the goods manufactured and bought-out items to deflate the value of the manufactured items and inflate the value of the bought-out items. This was purportedly done to evade the correct payment of excise duty. The notice claimed that the appellant diverted a significant portion of the actual margin on manufactured goods towards the billing price of bought-out items, thereby inflating their price and reducing the apparent value of the manufactured items.

Inclusion of Bought-Out Items in the Assessable Value:
The Collector held that the entire extra margin recovered by the appellant on the supply of bought-out items should be added to the value of the plant machinery contracted to be manufactured and supplied. The Collector also noted that the contracts were for consolidated prices without a break-up and that such break-up was made only for the appellant's convenience. The Collector concluded that the complete price of the plant, just prior to its stage of affixing to the ground, should be taken into account for assessment purposes, excluding the cost of erection and commissioning charges.

Excise Duty Liability on Plants and Equipment:
The appellant contended that the plants and equipment, once erected at the buyer's premises, became immovable property and thus were not subject to excise duty. The appellant argued that the show cause notice did not claim that the plants or equipment, which came into existence at the buyer's premises, were excisable goods attracting duty. The Collector, however, proceeded on the assumption that the plants came into existence just prior to being affixed to the ground, which was not a case propounded in the show cause notice.

Admissibility of Modvat Credit:
The appellant argued that if the bought-out items were held to be dutiable, they should be allowed Modvat credit for the duty paid on these items. The Tribunal noted that the benefit of Modvat proforma credit must be allowed to the appellant if the proposal in the notice is upheld to any extent.

Validity of the Show Cause Notice and the Impugned Order:
The Tribunal observed that the basis of the show cause notice and the impugned order were different and contradictory. The show cause notice did not proceed on the basis that the plants came into existence at the appellant's factory or just prior to being affixed to the ground. The Collector's assumption that the plants came into existence just prior to being affixed to the ground was not supported by the show cause notice. The Tribunal agreed with the appellant that the demand could not have been confirmed on a ground not propounded in the notice. The Tribunal concluded that the confirmation of the demand on such a basis was unsustainable.

Conclusion:
The Tribunal set aside the impugned order and remanded the case to the jurisdictional adjudicating authority for a fresh decision in accordance with the law and the observations made in the judgment. The appeal was allowed, and the adjudicating authority was directed to re-examine the correctness of the basis of the show cause notice and consider the appellant's contentions on merits.

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