Ashok Bhan, J. - (1.) Respondent company is an undertaking wholly owned by the Government of Tamil Nadu. It is engaged in the manufacture of railway wagons and conveyor systems falling under Heading 8605.50 and 8428.00 respectively of the Schedule to Central Excise Tariff Act, 1985. Upon verification of their accounts, it was noticed on 16th July 1998 that the respondent had entered into a contract, being Contract No. 94/RS/PF &EC/954/3 dated 1.12.1994, with the Southern Railways for manufacture and supply of 106 wagons of BTPGLN wagons for an amount of Rs. 16, 10,90,974/- which was inclusive of cost of steel at Rs. 6,65,833/- per wagon. The cost of each wagon worked out to Rs. 15,29,724/- (6,55,833 + 8,63,891). The Railways supplied free raw material worth Rs. 7 lac per wagon. The respondent paid central excise duty @ 15% ad valorem and cleared 21 wagons to their customer till 16th July 1998. It was also noticed that the respondent has adjusted the value mentioned in the invoices against 50% of the advance amount received from its customer. Respondent had also collected a sum of Rs. 2,400/- per wagon as by way of inspection charges. This amount allegedly was not included in the assessable value. The total amount of advance received was to the tune of Rs. 10,29,80, 192/-. The respondent also raised a bill being Bill No. 20 dated 4.6.1998 for escalation price for 19 wagons and the amount on this account was Rs. 18,81,036/- for which the amount of duty involved was Rs. 2,82, 155/- which amount, it was alleged, had not been debited by the respondent. According to the appellant, the respondent had suppressed the value in the invoice with a view to enjoy the benefit of duty involved on differential value. Proceedings were, therefore, initiated against the respondent by issuance of Show Cause Notice No. 98 of 1998 dated 28th September 1998 on the following charges:(a) that they have undervalued the cost of wagons and conveyor parts cleared to Railways and Neyveli Lignite Corporation (NLC) to the extent of interest accrued on advances received from them and thus contravened Section 4 of the Act; (b) that they have valued the cost of wagon to the extent of inspection charges collected and hence contravened Section 4 of the Act read with Rules 173Q, 9(1), 173F and 173G of the Rules; and (c) that they have not paid duty on the escalation charges collected from the Railways thereby contravening Section 4 with Rules 173C, 9(1), 173F and 173GG.
(2.) Thus, by the said show cause notice, the respondent was called upon to show cause as to why price of the wagons and other goods so suppressed and cleared to Railways and NLC should not be re-determined; duty amounting to Rs. 61,44,084/- on the interest accrued on the advances received from Railways be not charged; an amount of Rs. 7,560/- being duty involved on the inspection charges collected from Railways be not demanded; and an amount of Rs. 2,82, 155/- being duty involved on the escalated price be not demanded and the said amount paid subsequently by the respondent be not adjusted/appropriated against the above duty liability and as to why penalty should not be imposed.
(3.) After the two replies submitted by the respondent, the Commissioner of Central Excise, vide order dated 29 th December 2000, confirmed the demand Rs. 61,44,084/- towards the interest on advances invoking proviso to Section 11A of the Central Excise Act, 1944 (for short, the Act); the duty demand of Rs. 7,560/- towards inspection charges under the proviso to Section 11A of the Act; duty demand of Rs. 2,82, 155/- involved on the escalation price of the wagons under Section 11A of the Act and ordered that the said amount paid subsequently be appropriated against this duty liability. The Commissioner also imposed the penalty of Rs. 20 Lac under Rule 173Q and Rs. 34, 18,250/- under Section 11AC of the Act.;