Full Judgment
2. The dispute in this appeal relates to the period from 10.10.1989 to 30.11.1989. Appellant was manufacturing and supplying sleepers to the Railways using H.S. Wires and inserts supplied free of cost by the railways. Appellant filed price lists in Part I declaring the price paid by the railways for the purpose of determining the assessable value and approval thereof, was clearing goods on payment of appropriate duty. Show cause notice dated 6.7.1990 was issued alleging suppression of material facts and stating that the assessable value should include the cost of materials supplied free of cost by the railways and to this extent there was misdeclaration of value. The notice proposed demand of differential duty arrived at on that basis and imposition of penalty. Appellant resisted the notice on merits as well as on the ground of limitation. However, the Additional Collector overruled these contentions and confirmed the demand and imposed penalty.
3. Learned Counsel for the appellant conceded that the appellant has no case on merits in the light of the decision of the Supreme Court in Burn Standard Co. Ltd. v. Union of India . Learned Counsel addressed his arguments on the question of limitation.
4. The manufacturing unit commenced production in early 1989. By letter dated 17.5.1989 appellant sought information as to whether product was excisable, the rate of duty and how the value of the product was to be calculated since subject raw materials were being received free of cost from the railways. Appellant received reply dated 25.5.1989 in answer to these queries. The letter stated that appellant shall calculate on the basis of approved value of certificate. Price list in Part I was submitted along with letter dated 14.11.1989. In this letter the appellant disclosed receipt of some of raw materials free of cost by the railways. It also referred to existence of an escalation clause in the contract. In the light of this correspondence it is contended that appellant had also disclosed to the department the fact of receipt of raw materials free of cost from railways and the department never informed the appellant in spite of specific query put, as to whether the cost of these raw materials was to be included in the assessable value. In these circumstances, it is contended that there was no suppression of materials facts nor intention to evade duty and therefore, the larger period of limitation under the proviso to Section 11-A could not be invoked. Shri M. Ali, JDR while rebutting the above submissions contended that there was an escalation clause in the contract between the appellant and the railways, this was specifically brought to the notice of the latter by a letter dated 14.11.1989 and in view of the escalation clause, all assessments made must be regarded as provisional. He placed reliance on the decision in Aluminium Cables Ltd. v. Collector of Central Excise, New Delhi 5. In the above decision, relying on the decision of the High Court of Bombay in Premier Automobiles Ltd. v. Union of India and Ors.
, the Tribunal held that since purchase orders contain price variation clause depending on the price variation of raw materials and copies of purchase orders and contracts were submitted along with price lists, the price agreed and the price declared were provisional inasmuch as they were subject to the price variation clause. Consequently the provisionality also attaches to the approval granted to the price lists and the assessments have to be regarded as provisional and therefore, the provision of limitation contained in Section 11-A of the Act is not attracted. Following the above decision, we hold that the demand was not required to be made within the period of six months as contemplated in Section 11-A of the Act and notice was not barred by time.
6. The correspondence referred to earlier clearly shows that appellant had brought all the relevant circumstances to the notice of the department. In this view, it cannot be said that the appellant was guilty of any contumacious conduct calling for imposition of penalty.
7. In the result, we set aside the penalty imposed on the appellant and confirm the impugned order in regard to the demand.