ORDER
Gowri Shankar, Member (T)
1. Ghatge Patil Industries Ltd., Kolhapur was engaged in the manufacture of engineering product in its factory. Among these were assemblies of earth moving equipment which were manufactured for supply to Bharat Earth Movers Ltd. (BEML for short). BEML supplied to the assessee free of cost some of the components used in the manufacture of these assemblies. The appellant used these components and others in the manufacture of the assemblies which it sold to BEML. The department issued four notices to the appellant on 4.11.1997, 2.12.1997, 18.5.1998 and 3.7.1998. these notices alleged that in arriving at the assessable value of the gods manufactured and supplied to BEML, the assessee did not take into account the cost of the material that was supplied free of cost. This is referred to by the parties as assesstance material. The two notices dated 4.11.1997 were for clearance in October 1992 and the notice dated 2.12.1997 is for a period November 1992 to 31.10.1997. Each of the notices invoked the extended period of limitation contained in the proviso under Sub-section (1) of Section 11A alleging suppression of facts by the assessee of supply of the assistance material.
2. In its reply, the assessee accepted in principle that the cost of the assistance material ought to have been included in the assessable value of the goods that it manufactured and admitted its failure to do so for part of the period. It stated that the cost received up to September 1995 had not been included. The cost of such material received subsequently had however been included. The changeover in practice took place in 1997, when on the receipt of invoices issued by BEML, These assessee decided to take modvat credit of the duty that the former paid. It was therefore decided to make payment of duty on material received from 1994 onwards. It however disputed the applicability of the extended period of limitation, first on the ground that the copies of the purchase order which showed receipt of the assistance material free of cost had been enclosed to the price list, secondly on the ground that certificates issued under Rule 57E in 1997 after the assessee paid the differential duty would have made the department aware of the free receipt of assistance material. It referred to audit conducted by the departmental officers and finalisation of the RT12.
3. The Commissioner did not accepted these submissions. He said that the assessee had not produced any documentary evidence that it had informed the department of the receipt of free supply of assistance material, the cost of which had not been included in the value of the assemblies. He did not accept the further contention on the bonafide belief that this cost of the material was not included. He emphasises the fact that it is only when the assessee received instructions from BEML to take modvat credit of the duty paid on these goods that it commenced to include them in the assessable value. The notice adopted as the basis for the assessable value of the assistance material the prices at which these goods were being sold by BEML as spare parts to its customers. The Commissioner then proceeded to confirm the duty and imposed penalty. Hence this appeal.
4. We are not able to accept the contention that the counsel for the appellants advances, that the two notices dated 4.11.1997 and 2.12.1997 would not have invoked the extended period of limitation. The finding of the Commissioner that no documentary evidence has been shown to have been furnished to the department, indicating receipt of free assistance material is not successfully assailed. During the entire period in question, the assessee was availing of the benefit of the provisions of Rule 173C(11) which dispensed with the filing of price list, assessment being made on the basis of the commercial invoices that were issued. The question of furnishing price list during this period and therefore of enclosing any purchase order to this price list would not arise. It had not been shown that prior to 1992 when the price lists were being filed, copies of the purchase orders were enclosed to such lists. A few copies of the price lists that we have seen do not indicate that purchase orders have been enclosed. we do not think the fact that some audit may have been carried out by the departmental officers leads to the conclusion that they would have necessarily been shown the documents which indicated the receipt of free supply. The responsibility for including the cost of these goods in the value of finished material was upon the assessee and it was required to advise the department for doing so. It has not done so. In 1997, the assessee did commence to take into account some cost of the assistance material and issued certificates under Rule 57E showing payment of differential duty for goods received from October 1995 till date. These certificates were no doubt countersigned by the departmental officer. However, these certificates themselves are somewhat ambiguously worded. They indicated the reasons for payment of differential duty and as the “cost of assistance material included.” There is however nothing in this to indicate what this assistance material was and who supplied it. We find significant omission by the assessee to indicate these relevant details even when it paid the duty. After all, it was a simple mater for the assessee to inform the department clearly and subsequently of the fact of receipt of free material and it has not done so. We are therefore of the view that the certificates issued under Section 57E do not led to the conclusion that the department was clearly made aware of the receipt of the goods. We confirm the applicability of the extended period of limitation.
5. We now turn to the merits of the issue. The contention of the counsel for the appellant is that the cost has been taken by it for inclusion in the value of the goods what it was furnished by BEML. He refers in this regard to correspondence between the assessee and BEML. He contends that in any event, the price of BEML for the sale of these goods to its customers would be considerably higher than the cost ought to be, such as elements profit which would be inordinate taking into account that it is the normal practice in the automobile industry for spare parts to be sold at a price of much higher than their cost.
6. It appears to us that BEML has been taking a contradictory concept for supply of different value to the department and to the assessee with regard to these goods. The department has obtained knowledge of the price of these goods from BEML. The assessee contends that it based its value upon information that it received from BEML. By its order passed on 16.10.2002, therefore, the Tribunal asked for an affidavit from the responsible person of BEML as to the basis for the price that it gave to the assessee, indicating the amount paid to the suppliers of the goods. The affidavit filed in response by K.C. Medappa, company secretary of BEML, is hardly helpful. Paragraph 10 of the affidavit indicates that BEML had accordingly supplied to the appellant the landed cost including freight charges, indicating that the landed cost is lower and the sale price of the material in question since it will not include overhead charges in the marketing division. Paragraph 11 of the affidavit indicates the basis for the prices only spare parts catalogue, saying that it is determined on a number of facts such as its procurement price, overhead expenses, marketability from various factors such as class of buyer of the equipment, marketing forces, availability of ready stock at their disposal. It was not a very difficult matter for BEML to furnish the information that was sought for in a simple tabular manner. However it is not really the function of this Tribunal to go into the details of the assessment.
7. We are however not able to uphold the claim made by the departmental representative accepting the sale price of BEML as the basis for the assessable value. The affidavit of Medappa is at least clear to this extent that the sale price is not fixed from time to time. It also brings out the fact that there is a mark up of these goods.
8. The cost of the assistance material that was included in the assessable value of finished goods would be the cost that the appellant would have incurred, if it had purchased these goods. That would include the price payable to the manufacturer or supplier of these gods, the cost of transportation, insurance of these goods up to the appellant’s factory, the overheads that it incurred in procuring these goods and interest on inventory. This is the one that would apply if it had itself procured the goods. We note the objection raised by the counsel for the appellant that cost relating to procurement of the goods and inventory cost not to be included. He is not able to say why cost relating to procurement is not to be included, and contends that inventory costs are low. It is only the actual cost that we are concerned with, and not whether they are high or low. We are therefore unable to accede to the objection. BEML told the appellant that it supplied to the appellant the landed cost. Counsel says that it is a weighted average. the expression “weighted average” has not been explained either to the appellant or to us and, in the absence of the relevant factor constituting the elements for which the weighted average is taken, is, we are of the view, entirely meaningless. It is clear that from 1995 onwards however, BEML issued invoices under Rule 52A with regard to these goods. This was necessitated by the fact that it took modvat credit of the duty that was paid on these goods by their manufacturer and debited that credit when it passed the modvat to the appellant. We think that this could form the basis. The assessable value, in the absence of any other material, has to be applied to earlier clearance also. To this basis assessable value must be added the elements. We make it clear that if this is necessary, it is upon to the assessee to make some document from, or otherwise obtain, by exercise of material from BEML or any other person.
9. We also accept the point for the appellant that in the event that a particular item of data is not able to be furnished by the appellant for the particular period of time for some reasons, despite his best efforts, the element closest to it in time should be accepted.
10. Having regard to the complexity of the issues involved of the period of time that we are concerned with, we think it would be appropriate to give the appellant three months within which to work out the data applied for determining the duty and submitted to the adjudicating authority. The adjudicating authority, thereafter, shall decide upon the value and the liability to penalty, if he considers it appropriate in accordance with law.
11. The appeal by the departmental seeks levy of interest under Section 11AB for the period from 28.9.1996. Since, in any event, we are remanding the matter to the adjudicating authority, this aspect may also be decided by him.
12. The appeals are accordingly allowed and the impugned order set aside.