Judgment:
1. The dispute raised in this appeal is about the valuation of PCS assemblies manufactured and cleared by the assessee to their depots.
The period of dispute is June 1996 to January 2000. The original valuation of these PCBs was carried out under Rule 6(b)(ii) of Central Excise Valuation Rules i.e. based on the cost of production of the goods. Subsequently, show cause notice dated 12.4.2000 was issued alleging that comparable goods produced by the assessee were being sold on ex-factory basis and valuation of the PCBs removed to the depots were required to be carried out based on the value of such comparable goods in terms of Rule 6(b)(i) of the said Valuation Rules. The notice held that revision of the assessment based on the comparable value indicated a short levy of Central Excise duty amounting more than Rs. 63 lakhs. The show cause notice, accordingly, proposed recovery of the duty short levied as well as imposition of penalty on the appellant.
The notice also alleged that as the short levy had taken place on account of suppression of facts by the appellant with intent to evade payment of duty, short levy is liable to be recovered for the extended period of five years as contemplated in the proviso to Section 11A of the Central Excise Act. The appellants resisted the proposals made in the show cause notice during the adjudication proceedings; but did not succeed. The Commissioner of Central Excise, Mumbai-6 upheld the allegations vide his order in original No. 10-18/01/Commr-VI dated 16.5.2001. That order has occasioned this appeal. The appellants have contested the duty demand on merits as well as on the ground of time bar.
2. On merits the contention of the appellant is that the comparison made in the adjudication proceedings between the two sets of PCBs is not correct as the PCBs removed to the depots were different from PCBs sold ex-factory to various buyers. The point being made is that the PCBs removed to depots are Generic in kind while the PCBs sold ex-factory are Customised PCBs. It is pointed out that Generic PCBs are required to be worked upon in order to make them customized so that they are suitable for use in specific UPS systems. As against this Customised PCBs have already been worked upon and made ready for fitment in the machinery already sold. During the hearing of the case, learned Counsel pointed out that several processes are required to be carried out on Generic PCBs for the purpose of Customisation,, the following being the main processes: 3. The learned Counsel also pointed out that the appellants had adduced technical opinion in the nature of affidavit of expert in support of their contention that Generic PCBs and customized PCBs are different goods and cannot be compared. He also pointed out that detailed information about each process required to be carried out during customizing had been filed alongwith the reply to the show cause notice. The learned Counsel also pointed out that the fact that customized PCBs are different from Generic PCBs has been noticed by the adjudicating authority also.
4. The learned Counsel for the appellants have emphasized that it is settled law that central excise law permitted only the adoption of the value of 'such goods' for the assessment of excisable goods and if the goods are not 'such' their value cannot be the basis for assessment or other goods. The Counsel also pointed out that even when assessment is to be made under Rule 6(b)(i) of the Valuation Rules, based on the value of comparable goods, the rules specifically provided for providing adjustments towards differences if any in the material characteristics of the goods being assessed and the comparable goods.
The appellants point out that the Commissioner has not made any provision towards differences, even though he had noted that Generic PCBs and Customized PCBs are different. The learned Counsel has relied on the decision of the Tribunal in the case of Century Pulp & Paper v.CCE, Meerut, 2000 (36) RLT 246 (CEGAT) wherein it was held that the value of paper in reel form cannot be determined based on the value of paper which has been cut into sheets. The learned Counsel also pointed out that the Tribunal has also held in the case of Savita Chemicals Ltd. v. CCE, Mumbai-VI, 2000 (119) ELT 394 that bulk oil and packed oil do not fall in the same category. Based on these decisions and the provisions of Central Excise Valuation Rules 1975, the learned Counsel submitted that adoption of the value of customized PCBs for the purpose of Generic PCBs as done in the impugned order is not legally sustainable at all.
5. Another point made by the appellant regarding difference in prices is that Customised PCBs are sold for repair purposes and the value of such sales cannot be adopted for the valuation of parts in general, inasmuch as normally vast difference exists, between the parts sold for manufacture of original equipment and parts for repair.
6. On the question of time bar the learned Counsel has pointed out that the appellants are not guilty of suppressing any material facts. Both the types of clearances had been made under prescribed excise documentation and these documents were in the knowledge of the department. The appellants were under the genuine impression that both the types of PCBs being different, the value of one cannot be adopted for the valuation of another.
7. As against the aforesaid submissions on behalf of the appellants, the learned SDR has pointed out that Rule 6(b)(i) of the Central Excise Valuation Rules specifically provided for the assessment of captively consumed goods based on the price of comparable goods. He pointed out that both Generic and Customised PCBs fell under the same code No. and were essentially the same, the only difference was that Generic PCBs were required to be made ready before use in particular machines. He pointed out that what required to be done was to suitably modify the Generic PCBs. He pointed out that in such a situation the goods were required to be assessed under Rule 6(b)(i) based on the value of comparable goods. He submitted that, if at all, any modification was required to be made in the sale price of comparable goods, it was only in respect of difference in characteristics between the comparable goods and the goods to be assessed and the case could be remanded to the Commissioner for reconsideration in this regard. He also submitted that the appellants had suppressed the fact that both the types of PCBs bore the same code No. and their claim to assessment of Generic PCBs based on cost of production was made after suppressing the fact of sale of comparable goods by them.
8. The records of the case make it clear that there is considerable difference between customized PCBs which are ready for fitment as replacement parts and Generic PCBs. Many processes are to be carried out for customizing. Failure during customization also takes places.
The appellant had produced detailed and convincing evidence in the reply to the show cause notice as well as through expert opinion that the two types of PCBs have to be treated as different goods. Therefore, we are in agreement with the appellant that the two types of PCBs could not be compared and the value of one adopted for the other. There is also merit in the appellants submission that spare parts supplies invariably are at a higher price than original equipment supplies.
9. The appellants submission that this is not a case involving suppression of facts with intent to evade duty also merits acceptance.
Both the varieties of PCBs were being cleared under approved central excise documents and the appellants had not suppressed the fact of variation between sale price and cost of production. Reasonable diligence on the part of the department would have enabled them to take remedial action to recover short levy, if any, during the normal period stipulated in Section 11A. In these circumstances, we are of the opinion that extended period under the proviso to Section 11A was not available to the department 10. In view of what has been stated above, the appeal is allowed with consequential relief to the appellants.