ORDER

Per Shri V.P. Gulati :

This appeal is against the order of the Collector of Central Excise, Bangalore. Under the impugned order the appellants have held to have been evaded duty in respect of the forgings which had been manufactured on job work basis. The appellants are manufacturers of forgings on their own account as also on the account of others out of the raw materials supplied by them. The appellants had got their classification list approved both in respect of the goods manufactured by them out of their own raw materials as well as in respect of the goods manufactured on job work basis. The appellants in respect of the goods manufactured on job work basis claimed benefit of Notification 214/86 and the classification list based on that was approved. The appellants however did not follow the procedure as envisaged under Notification 214/86 as their customers got the work manufactured on job work basis was not operating under the MODVAT Scheme for the benefit of Notification 214/86 had been issued.

2. The learned Consultant for the appellants has pleaded that the appellants were law abiding and to establish their bonafides they paid duty as was demanded and thereafter only contested the demand. He pleaded that while he is not disputing the duty liability on the forgings his plea is that the demand is barred by limitation. He has urged that the appellants were on record in regard to the goods which were manufactured on job work basis and had been submitting the invoices under which the goods were sent to the customers along with RT 12 returns. He has therefore pleaded that the Department was fully kept informed about their operations on job work basis and removal of the goods without payment of duty. He has therefore pleaded that the longer period of limitation should not have been invoked. In this context he has cited the decision of the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. H.M.M. Limited reported in 1995 (75) ELT 497, Cosmic Dye Chemicals Vs. Collector of Central Excise reported in 1995 (75) ELT 721= 1995 (6) RLT 333 (S.C.) and the decision of the Tribunal in the case of Engineering & Commercial Agencies Ltd. Vs. Collector of Central Excise, Madras reported in 1996 (82) ELT 295 = 1996 (13) RLT 716 (CEGAT-SRB). The plea is that since there was no malafide involved on the part of the appellants and the appellants were on record as to the clearances made without payment of duty no intention to evade payment of duty can be read from this context. In the alternative he has pleaded that the value adopted for arriving at the assessable value was not correct in as much as notional profit margin of 10% had been added to the value of the raw materials and the job charges charged and warranted. In that view he has pleaded that the order to this extent will have to be set aside. He has also prayed alternatively for reduction in the penalty levied. He has pleaded that in the facts and circumstances of the case confiscation of plant and machinery was not warranted.

3. Heard the learned JDR Shri S. Arulswamy. He has pleaded that the RT 12 returns were filed in respect of the goods manufactured by them on their own account out of their own raw materials and in respect of which the duty was paid and the clearances made on job work basis were not reflected in the RT 12 returns. He has pleaded mere filing of invoices cannot be taken as substitute for filing of RT 12 returns. He has further pleaded that the appellants were availing the benefit of Notification 214/86 when they were not eligible for the benefit of the said notification as the inputs received by the appellants were not in terms of the provisions of MODVAT Scheme as under Rule 57F (3).

4. In a rejoinder the learned Consultant has pleaded that the figures of job work done were not required to be reflected in the RT 12 returns in view of the procedure prescribed at the relevant time.

5. We have considered the pleas made by both the sides. We observe that the admitted position is that the goods which were manufactured on account of certain customers who have supplied their own raw materials had been cleared without payment of duty. The appellants were manufacturing same categories of certain goods on their own account and they were clearing the same on payment of duty. There is no explanation from the appellants as to when they were clearing the same category of goods on payment of duty why they did not clear the other goods which were manufactured on job work basis also on payment of duty. The only reason given by the learned Consultant is they had got the approval in the classification list for clearance of the goods under Notification 214/86. We observe that this approval will have meaning only when the appellants actually operated under the parameters set out under this Notification 214/86. Notification 214/86 has been issued to facilitate the movement of the goods where an assessee is operating under the MODVAT Scheme and he wants to get certain goods manufactured or processed by job worker. In the present case the appellants were fully aware that the goods and the raw materials which they were receiving were not coming under the MODVAT Scheme and the same were also not covered by the challans envisaged under Rule 57F the rule under which the movement of the goods from an assessee working under MODVAT Scheme is provided for. When this was the position it was not understandable how the appellants can seek the cover of the approval of the classification list for clearance of the goods duty-free under Notification 214/86. Apparently they got this approval done with a view only to evade payment of duty. We in the circumstances hold that there were no bonafides on the part of the appellants and they have suppressed the facts. We have asked the learned Consultant that when they were not receiving the inputs in terms of Rule 57F (3) for the purpose of Notification 214/86 why they did not come forward to inform the authorities while they were claiming the benefit of Notification 214/86 also that they were not complying with the requirements of the said notification. The learned Consultant has no explanation to offer in this regard. Enclosure of the invoices with RT 12 returns in regard to the goods which were manufactured on job work basis and cleared without payment of duty only was to make the authorities believe that the appellant was operating under Notification 214/86 in terms of classification approval and therefore there was no need for them to ask any question from the appellant. Any inaction on the part of the authorities in regard to these invoices will therefore has to be read in the background of the approval that the assessee had obtained in regard to the clearances of the goods. In the above background therefore we hold that merely enclosing the invoices cannot be read in favour of the assessee in regard to the benefit. We therefore hold that the longer period has rightly been invoked. In regard to the addition of the notional profit of 10% the learned Consultant has brought to our notice the instructions issued by the Board under Section 37B. The learned Collector we find in his order has not examined in depth the scope of these instructions and has also not spelt out on what basis the notional profit of 10% has to be added in the context of the manufacture of the goods on job work basis. We therefore hold that so far as the addition of notional profit is concerned the matter is required to be re-examined and we therefore for this limited purpose while upholding that the goods are liable to duty, remand the matter to the learned lower authority for de-novo consideration and decision after affording the appellants an opportunity of hearing. In the facts and circumstances they are liable to penalty. However taking into consideration that the appellants are manufacturers of the goods on job work basis and the quantum of duty involved we hold that the ends of justice will be met if the penalty is reduced to Rs. 10,000/- (ten thousand). So far as the confiscation of plant and machinery is concerned in the facts and circumstances of the case the confiscation is sustainable in law. However taking into consideration the submissions made and the quantum of duty involved we hold that the ends of justice will be met if the redemption fine is reduced to Rs. 5,000/- (five thousand). But for the above modification the appeal is otherwise rejected.