ORDER
U.L. Bhat, J. (President)
1. This appeal is directed against Order-in-Appeal dated 31-8-1988 passed by the Collector (Appeals) allowing the application (Appeal) filed by the Assistant Collector on the direction of the Collector (Appeals) against the order passed by the Assistant Collector dropping the proceedings initiated by two show cause notices dated 5-9-1985 and 9-2-1986.
2. Respondent is engaged in the manufacture of components on orders placed by customers. For this purpose, appellant manufactures moulds and dies and ultimately tools according to the specification and designs supplied by the customers. The moulds, dies and tools are ultimately returned to the customers who have paid development cost of the same. Show cause notices alleged that the cost of tools, moulds and dies are exclusive of the cost of components manufactured and supplied to their consumer industries. The show cause notices further alleged that the invoices charging the cost of tools, moulds and dies are not sent together with the relevant gate passes for assessment to the Department and the tools, moulds and dies manufactured on behalf of the consumers do not belong to respondent, and respondent did not properly account for these goods and did not observed Central Excise formalities for clearing the same, and did not paid duty on the same. Show cause notices referred to non-payment of duty on tools, moulds and dies on which duty was payable. Notices proposed demand of duty on such goods and imposition of penalty.
3. Respondents submitted reply to the show cause notices starting that realisation in advance of the cost of tools, moulds and dies was according to the trade practice, that as long as components are manufactured, tools, moulds and dies are not returned to the customers and, there was no sale till then. Respondent further contended that tools, moulds and dies are not being removed, from the factory but are used in the factory in the manufacture of the tools in one case and components in the other. Replies also claimed benefit of exemption Notification No. 72/83 in respect of tools and Notification No. 118/75 in respect of dies and moulds. Since the tools, moulds and dies have, till the dates of issue of show cause notices, not been removed from the factory, the question of payment of duty would not arise.
4. The Assistant Collector passed a common order in the two show cause notices dropping the proceedings but withovit assigning any reason. The order was challenged by the Department before the Collector (Appeals) who without granting respondent an opportunity of hearing allowed the appeal holding that since the respondent charged the cost of dies and moulds from the buyers, the value of tools would include the amount so charged. This order was set aside by the Tribunal at the instance of the assessee on account of violation of grounds of principle of natural justice. The case was remanded to the Collector for de novo consideration.
5. The Collector (Appeals) disposed of the appeal again finding that the dispute was confined to the cost of development of tools. It was not possible to add the cost of dies and moulds employed exclusively for manufacture of tools, in the cost of component parts because the tools are not used as inputs and non-moulds and components of such parts, and the cost of dies and moulds was to be included in the value of the tools cleared by the respondent in the case of development of tools and to that extent the application of Department was correct. He also directed that the cost of dies and moulds cannot be included in the value of component parts manufactured by the respondent. This part of the order is challenged by the Department.
6. According to Shri H.K. Jain, SDR, the component parts being dutiable, the value of dies and moulds should be reflected in the assessable value of the component parts since they were developed in the course of manufacture of tools for the purpose of manufacture of components and the Collector (Appeals) was, therefore, in error in holding that the cost of dies and moulds are not to be included in the components cleared by the respondent.
7. The contention urged by the Department would have merited serious consideration if the show cause notices had laid a foundation for such a claim. We have adverted to the substance of the averments of the show cause notices. The show cause notices were specifically confined to the alleged clearances and non-payment of duty in respect of tools, moulds and dies. The show cause notices did not allege that in computing duty on the component parts, there was failure to determine the assessable value correctly by inclusion of the proportionate cost of the moulds, dies and tools in the assessable value. In the absence of such an allegation in the show cause notices, the Collector (Appeals) could not have held that the cost of such goods should be included in the value of the component parts for the purpose of computing duty payable. Therefore, the contention urged by the Department in the present appeal is not tenable.
8. The appeal is dismissed. The cross objection being merely supportive is also closed.