M. Santhanam, Member (J) for himself and Sh. Harish Chander, Member (J)

1. This is an appeal against the order passed by the Collector of Central Excise, Calcutta, dated 3-2-1983.

2. The appellants are a Government of India Enterprise manufacturing excisable goods falling under T.I. 68, namely structural fabrication and goods wagons. The appellants filed classification lists which were approved by the Supdt. of Central Excise on 16-11-1975. The local Inspector sent a communication to the appellants on 13-8-1975 asking them to give their option to avail the benefit of Notification 120/75, dated 30-4-1973 regarding the payments excise duty on invoice value. The appellants also state that they are entitled to the benefit of notification 119/75 dated 30-4-1975. According to them in respect of the structural fabrication done on job work basis they would be entitled to the benefit of that notification. The appellants have cleared the goods under appropriate gate passes and RT-12 returns have also been submitted every month.

3. While so a show cause notice was issued by the Supdt. on 5-6-1980 alleging that the appellants had contravened Rule 9(1) read with Rules 10 and 173F of the Central Excise Rules, 1944, inasmuch as they had cleared structurals fabrication and railway wagons during the period 1-3-1975 to 31-12-1978 from their factory on payment of central excise duty under T.I. 68 on conversion cost only without including the value of the raw-materials received by them from different parties. The appellants were required to show cause to the Asstt. Collector as to why central excise duty of Rs. 6,33,072.50 should not be realised from them and why a penalty should not be imposed. The appellants sent a reply Inter alia staling that they have entered into job work contracts with various Government and/or semi-Government Institutions, The duty for the job work was payable on the job charges under Notification 119/75. Regarding the wagons they urged that the materials supplied by the Indian Railways with whom they had entered into contracts were supplying certain materials and that the value of those materials were excluded in the invoice price. The invoice excluded the value of the materials supplied by the Railways. The appellants also urged that there was no clandestine removal nor was there any mala fides.

4. The Collector of Central Excise after affording a personal hearing to the appellants held under the impugned order that the appellants were liable to pay the duty demanded. He also imposed a penalty of Rs. 2 lacs. Aggrieved by that order the appellants are before this Tribunal.

5. Shri K. Narasimhan, the learned counsel for the appellants, argued on length raising several contentions. Regarding the railway wagons he stated that the wagons were manufactured pursuant to contracts of sale entered into between the appellants on the one part and the railways on the other. The railways were supplying Roller Bearings, Axle Boxes. Couple is, etc. free of cost to be fitted to the wagons manufactured. The appellants have sent a letter to the Range Supdt. making it abundantly clear that the prices for wagons sold were exclusive of the cost of the wheel sets, bearings, couples, etc. which were supplied by the railways free of cost. He drew our attention to the invoices which refer to the contracts entered into between the railways and the appellants. The contract stipulated the price of the manufactured goods and there was no proof that the price was not the sole consideration. On 30-8-1975 the Range Supdt. wanted the appellants to give the declaration of option as required under Government of India's Notification 120/75 and the same was furnished on 15-9-1975. The appellants had declared that the invoice price was not influenced by any commercial, financial or other relationship. He cited the ruling reported in MANU/AP/0199/1984 : 1985 (19) E.L.T. 60 (Mysore Strudurals Ltd. v. Asstt. Collector of Central Excise, Hyderabad and Ors.). In