JUDGMENT

H.L. Dattu, J.

1) In this batch of civil appeals, the appellants have challenged the common order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai in Appeal No.A/2287-2290/WZB/MUM/2005/C-III/EB dated 20.12.2005.

2) By consent of the learned counsel, we have taken Civil Appeal No.2694 of 2006 as the lead case.

3) M/s. Aurangabad Electricals Ltd. (for short ‘M/s. Aurangabad EL’) are appellants in this civil appeal. They are engaged in the manufacture of Motor Vehicle Parts namely ‘Magneto Assembly’ in their factory at Aurangabad. For manufacture of their final product, viz. Magneto Assembly, they purchase some of the inputs, namely, ‘Pick-up Coil’, com bush, charging coil etc. from M/s. Bajaj Auto Ltd. (for short ‘M/s. Bajaj’) on which appropriate duty is paid by M/s. Bajaj. The appellants had submitted price declarations applicable to Magneto Assembly, which were accepted by the department.

4) The main issue involved in these appeals is the valuation of Magneto Assemblies cleared by the appellants - M/s. Aurangabad EL to M/s. Bajaj and consequent short payment of duty thereon on account of not taking into account the total landed cost of the inputs supplied by M/s. Bajaj.

5) The Commissioner, Central Excise and Customs, Aurangabad (for short ‘the Commissioner’), issued a show cause notice dated 27.04.2001, inter-alia alleging that the appellants have undervalued the Magneto Assemblies supplied to M/s. Bajaj during the period from April 1996 to December 2000. Accordingly, the appellant, M/s. Bajaj, Mr. Anil Mali, CEO of M/s. Aurangabad EL and Mr. Ranjit Gupta, Vice-President (Materials) of M/s. Bajaj were called upon to show cause as to why the differential duty specified in the notice should not be demanded and recovered under Section 11A of the Central Excise Act, 1944 (for short ‘the Act’) and why interest and penalty should not be imposed under Sections 11AB and 11AC of the Act. The show cause notice was also issued to Mr. Anil Mali, Chief Executive Officer of the appellant, M/s. Bajaj and Mr. Ranjit Gupta of M/s Bajaj were asked to show cause as to why penalty should not be imposed under Rule 209 A of the Central Excise Rules, 1944 (for short ‘the Rules’).

6) The appellants had replied the show cause notice, inter-alia, contending that they have not undervalued their final products namely, Magneto Assembly, since the same are cleared in wholesale trade in accordance with proviso (i) to Section 4(1)(a) of the Act. They had also contended that they had cleared the Magneto Assemblies in accordance with approved price declarations and finalization of RT 12 return assessment. Therefore, show cause notice and the demands raised were barred by limitation under Section 11A(1) of the Act. The co- noticee, more or less on the same lines as the appellants, had objected to the show cause notice and had further submitted that the department has not produced any proof that the co- noticee was anyway connected with the alleged under-valuation of inputs which were cleared by M/s. Bajaj on payment of appropriate duty and it was also contended that the entire notice was based on assumption and presumption and, therefore, it could not be established that the co-noticee was concerned with the exercisable goods which he knew or had reason to believe were liable for confiscation. It was further contended that since there was no undervaluation of excisable goods, no penalty could be imposed by invoking Rule 209A of the Rules.

7) After adjudication, the Adjudicating Commissioner passed an Order-in-Original No.04/CEX/2002 dated 25.01.2002, inter-alia holding that the inputs supplied to appellants by M/s. Bajaj were under-valued, and consequently, Magneto Assemblies supplied to M/s. Bajaj have been under-valued leading to evasion of duty. It was also held that M/s. Bajaj was incurring expenditure on account of freight/insurance, loading/unloading and handling charges etc. which, along with profit