Judgment:
1. Appellant is an engineering unit. They have been carrying out various fabrication works for Railway Coach Factory at Kapurthala.
2. The present appeal is directed against the duty demand of over Rs. 24 lakhs, made with regard to fabrication of "bottom side wall sheets" for Railway Coach Factory during the period January, 1996 to July, 1999.
3. The duty demand is being resisted on the ground of limitation. The appellant's contention is that the relevant facts about the fabrication activities carried out by the appellant and method of valuation were known to the Revenue authorities and therefore, the demand made by resorting to extended period as provided in the proviso to Section 11A of the Central Excise Act, 1944 is not sustainable. The demand is on the ground that the appellant did not include the value of free supply raw materials in the assessable value, while paying duty on 'bottom side wall sheets'. The submission of the appellant is that the appellant had been carrying out fabrication work for Railway Coach Factory for several years and in all those cases, iron and steel sheets required for fabrication were supplied free by the Railway Coach Factory. Under the contract, the appellant was being paid only fabrication charges and the appellant was paying duty on fabrication charges. It is pointed out that this issue was the subject matter of investigation in 1992 itself when summon dated 27-12-1992 was issued to the appellant asking them to produce all the relevant documents relating to fabrication work carried out for Railway Coach Factory. The documents summoned under that letter specifically included the contract with Railway Coach Factory and appellant's sales invoices etc. In reply to this summon the appellant had produced copies of the contracts, sales invoices and other connected papers. However, no order was passed directing the appellant to pay duty on the free supply raw materials.
With particular reference to fabrication of bottom side walls, it is submitted that the invoices raised by the appellant at the time of clearance of these goods specifically mentioned the contract number. It is their submission that it would be seen from those contracts that there is a specific mention of issue of raw materially the Railway Coach Factory to the appellant against bank guarantee to be provided by the appellant and that the contract also provided for "nil" excise duty. It is the appellant's submission that since these facts were in the knowledge of the Central Excise authorities, it was for them to carry out proper valuation of the goods fabricated by the appellant and to make timely demand of duty. The learned Counsel for the appellant emphasised that in a case like this, where relevant facts were known to both sides, it is not open to the Revenue authorities to issue duty demand on the ground of suppression of facts with intent to evade payment of duty. Learned Counsel has submitted that it is clear from the conduct of parties that there was no intention on the part of the appellant to evade any central excise duty. Duty if payable, could have been passed on to the Railway Coach Factory, if only demand was raised on time.
4. As against this, learned SDR took us to the following finding in the impugned order: "3.9. The extended period under proviso to Section 11A of the Act is invocable in this case as the noticee suppressed material facts from the knowledge of the department. They never informed the department that they were receiving inputs i.e. M.S. Sheet free of cost from their buyers of Bottom Side Wall Sheets. They mentioned the consideration of amount as assessable value for the clearance of Bottom Side Wall Sheets on the invoices issued under Rule 52A. Thus, they misstated the assessable value in their invoices. Further, in declaration filed under Rule 173C declaring therein their marketing pattern, the noticee has declared against Sr. No. III(B)(is) under Heading 'pricing pattern', Sub-heading 'for sale to industrial consumers', that they were not using any input/raw material/components/part accessories etc. supplied free of cost by their buyers".
and submitted that since the appellant had made misdeclaration in their 173C declaration that they were not receiving any raw material free, this was a clear case of misdeclaration of facts.
5. In his reply, the learned Counsel for the appellant has pointed out that the declaration filed by the appellant under Rule 173C had no relevance to the issue in dispute. It is his contention that 173C declaration was filed on annual basis and the declaration relied on by the Revenue is as follows : "B. Are you using any input/raw material/component/parts accessories etc. supplied free of cost by your buyer? If so, details may be supplied including its impact on the assessable value".
Learned Counsel for the appellant has explained that the declaration in question is in relation to marketing part tern and it is significant to note that in regard to Heading-B which is for "sale to industrial consumer", the appellant had indicated 'NA' in all the columns including the one relating to free supply raw material/component.
Learned Counsel has submitted that appellant was under the impression that Heading-B was not applicable to his fabrication work for Railway Coach Factory. He also pointed out that in any event, this annual declaration is of no relevance, once specific contracts relating to the fabrication work undertaken by the Railway Coach Factory had been filed before the Revenue authorities.
6. It is clear that details of the appellant's fabrication work for Railway Coach Factory including supply of raw materials by the Coach Factory were known to the Revenue authorities for quite some time. As early as 1992, the appellant's contracts, sales invoices etc. relating to his work for Railway Coach Factory had been summoned and obtained by the Revenue authorities. All these contracts indicated issue of raw materials by the Railway Coach Factory to the appellant upon the appellant executing bank guarantee. The orders for fabricating bottom side wall sheet was also on the same basis. Order numbers were being indicated in the invoices under which the goods were cleared. It would appear that a mere look at the rates for fabrication should have alerted the excise authorities to the fact that such a low rate (Rs. 590/- per set etc.) could not include the cost of raw materials. Be that as it may, this is not a case where a charge of suppression of facts with intent to evade payment of duty could responsibly be made.
If reasonable care had been taken by the Revenue authorities to scrutinise the contracts and other documents produced, they would have known in time that fabrication charges alone was being treated as assessable value. May be, Revenue was also of the opinion that fabrication charges alone were liable to duty. In either case, fault is not of the appellant. Relevant facts had been disclosed.
7. In view of what has been stated above, we are of the opinion that appellant's contention regarding demand being made beyond period of limitation is required to be accepted. We do so, and allow the appeal after setting aside the impugned order.