Per Justice K. Sreedharan :

Issues raised in these two appeals are identical. So we consider it advantage[ous] to dispose of them by this common order. For a proper understanding of the issued raised we refer to the facts in appeal 1798/98 in detail. Appellant there-in M/s. R.H.Industries is the manufacturer of Axle Beam Assembly which is a component part of Tractors manufactured by Punjab Tractors Ltd. While carrying out this job work of manufacturing Axle Beam Assembly they did not include the value of the Axle Beam Bushes supplied free of cost by Punjab Tractors Ltd. Therefore, on the allegation that appellant wilfully suppressed the value of Axle Beam Bushes while paying duty on the Axle Beam Assembly, show cause notice dated 1.2.95 was issued calling upon the appellant why sum of Rs. 3,16,913.05 should not be realised as the amount of duty evaded for the period from November 1990 to July 1995. Appellant herein objected to the show cause notice on many counts including the plea of limitation. The Adjudicating Authority by order in Original No. 95 CE ADC 97 dated 29.8.97 confirmed the demand. Aggrieved by that decision R.H. Industries preferred an appeal before the Commissioner. The Commissioner by an Order-in-Appeal No. C/1061/CE/APPL/CHG/97 dated 25.3.98 dismissed the appeal. Hence this appeal before us.

2. We heard Counsel representing the appellant and the ld. D.R. in detail. We perused the records.

3. R.H. Industries were manufacturing Axle Beam Assembly which is a component part of Tractors manufactured by Punjab Tractors Ltd. Axle Beam Bushes which were part of Assembly, were supplied to the appellant by Punjab Tractors Ltd., free of cost. While carrying out the manufacturing process of making Axle Beam Assembly those bushes were utilized. Value of those bushes were not included in the assessable value of Axle Beam Assembly. Consequently, R.H. Industries were showing a lesser value for the Assembly manufactured by them and a lesser duty was being paid. This method adopted by the appellant cannot be sustained, in view of the decision of the Supreme Court in Ujagar Prints Vs. Union of India & others reported in 1989 (39) ELT 493 (SC) and Burn Standard Co. Ltd. Vs. Union of India reported in 1992 (60) ELT 671 (S.C.).

4. Ld. Counsel representing the appellant raised contention that the show cause notice covering the period from November 1990 to July 1995 cannot be sustained. The contention is that for invoking the proviso to Section 11 A of the Central Excise Act, 1944. Department should not only show that there was short levy on account of fraud, pollution, mis-statement or suppression it must also be shown that said fraud, collusion, mis-statement or suppression must have been made with intent to evade payment of duty. In the instant case even if it is shown that there was short payment of duty, there could not have been any wilful mis-statement with intent to evade payment of duty. In the absence of wilful mis-statement with intent to evade payment of duty the Department cannot, it is argued, invoke the Proviso to Section 11A. In support of this argument ld. Counsel submits that even if the price of the bushes supplied by Punjab Tractors was included in the value of Axle Beam Assembly and duty paid accordingly, the Punjab Tractors could have claimed Modvat Credit of that amount. In such a situation there would not have been any intention to evade payment of duty. If duty was paid taking into consideration the value of bushes as well, when Modvat Credit is claimed, result would have been Revenue neutral. In such a situation, it was contended that the party could not have been attributed with any intention to evade payment of duty. We find much force in this argument. In a situation where the job worker utilizes the goods supplies by the manufacturer free of cost and includes the value of such goods for the purpose of payment of excise duty, the manufacturer can claim Modvat Credit. This will result in Revenue neutral.