2001 (1) TMI 414 - AT - Central Excise

Summary

Issues:
1. Valuation of components of motorcycles manufactured by M/s. A.G. Industries Pvt. Ltd.
2. Treatment of moulds and dies as capital goods.
3. Availment of Modvat credit on duty paid.
4. Demand of differential duty and penalty imposed.
5. Dispute regarding suppression of material to evade duty payment.
6. Interpretation of legal provisions on including amortisation value of moulds and dies in the valuation of goods.

Issue 1: Valuation of components of motorcycles
M/s. A.G. Industries Pvt. Ltd. manufactured components of motorcycles for M/s. Hero Honda Motors Ltd. using moulds and dies supplied by Hero Honda on a free-of-cost basis. The appellant did not include the cost of the moulds and dies in fixing the value of the components by resorting to the principle of amortisation. Consequently, show cause notices were issued demanding differential duty for five years. The Commissioner proposed penalties under Rule 173Q of the Central Excise Rules, 1944, along with interest as per Section 11AB of the Central Excise Act, 1944.

Issue 2: Treatment of moulds and dies as capital goods
The appellant treated the moulds and dies received from Hero Honda as capital goods and availed of Modvat credit on the duty paid on them. However, they did not include the amortisation value of the moulds and dies in determining the value of the manufactured components, leading to the dispute over the valuation of goods.

Issue 3: Availment of Modvat credit and penalty imposition
After a prolonged investigation, the Commissioner confirmed the demand and imposed penalties under Rule 173Q of the Rules. The appellant had already deposited the entire duty and interest claimed but contested the penalty, claiming to have availed of the concession under Section 11AC of the Act by paying 25% of the penalty imposed.

Issue 4: Dispute over suppression of material
The appellant argued that there was no intent to suppress material to evade duty payment, challenging the Commissioner's invocation of the extended period of limitation. They cited conflicting decisions on the inclusion of the amortisation value of moulds and dies in goods manufactured, relying on past tribunal decisions. However, the Tribunal found the appellant's actions contrary to the legal position since 1995, indicating an intent to evade duty payment.

Issue 5: Interpretation of legal provisions
The Tribunal rejected the appellant's reliance on certain decisions, emphasizing that the appellant's treatment of moulds and dies as capital goods for Modvat credit, without including their amortisation value in valuation, demonstrated an intent to evade duty. The Tribunal upheld the extended period of limitation invoked by the Commissioner based on the appellant's actions.

Conclusion:
The Tribunal dismissed the appeal, finding no merit in the appellant's arguments. The decision was based on the appellant's failure to include the amortisation value of moulds and dies in the valuation of goods, despite the legal requirement to do so since 1995. The Tribunal concluded that the appellant's actions indicated an intent to evade duty payment, justifying the imposition of penalties and the extended period of limitation.