2012 (5) TMI 34 - AT - Central Excise

Waiver of Pre-Deposit Granted due to Debatability of Assessable Value Inclusion

The Tribunal granted waiver of pre-deposit of demands confirmed against the applicants, citing the debatable nature of including the cost of drawings and ... Inclusion of value of drawings and designs in assessable value - liability of intermediate/job-worker for duty on inputs supplied free by principal - invocation of extended period of limitation - pre-deposit waiver and stay during pendency of appeal - compliance with Section 35F for stay of demandInclusion of value of drawings and designs in assessable value - liability of intermediate/job-worker for duty on inputs supplied free by principal - invocation of extended period of limitation - Whether the cost of drawings and designs supplied free by the principal manufacturer and on which the principal discharged duty is includable in the assessable value of the goods cleared by the job-worker/intermediate manufacturer such that extended period of limitation is invokable - HELD THAT: - The Tribunal noted that the appellants did not include the cost of drawings and designs supplied free by the principal manufacturer in their assessable value and that the principal manufacturer had discharged duty on the final products after including such costs. The Tribunal relied on the then-prevailing decision of the Hon'ble Apex Court in International Auto Ltd. which held that an intermediate manufacturer need not pay duty on inputs supplied by the final product manufacturer, a view followed by this Tribunal in subsequent cases including Orissa Industries Ltd. Given that International Auto Ltd. was binding during the impugned period and followed by the Tribunal, the contention that the extended period could not be invoked had merit. The Tribunal found the legal question debatable rather than settled against the appellants.Found the issue to be debatable and that precedent weighed in favour of non-liability of the intermediate manufacturer for the value of drawings and designs supplied free by the principal; therefore extended period contention had some force.Pre-deposit waiver and stay during pendency of appeal - compliance with Section 35F for stay of demand - Whether pre-deposit of the entire confirmed demand should be waived and the balance amount stayed during the pendency of the appeals - HELD THAT: - The Tribunal observed that the appellants had paid the duty and interest for the normal period of limitation and that the principal legal issue on inclusion of design/drawing costs was debatable. In view of the debatable nature of the issue, the earlier binding precedent, and that payment for the normal limitation period had been made satisfying Section 35F requirements, the Tribunal exercised its discretion to waive the requirement of pre-deposit of the balance amounts and to stay the demand, interest and penalty during the appeal.Requirement of pre-deposit of the balance duty, interest and penalty waived and the demand stayed during the pendency of the appeals.Final Conclusion: The Tribunal found the central valuation issue debatable in view of binding precedent earlier in force and, having noted that duty and interest for the normal limitation period had been paid, waived the balance pre-deposit and stayed the demands during the pendency of the appeals. Issues:Waiver of pre-deposit of demands confirmed against applicants.Analysis:The applicants sought waiver of pre-deposit of demands confirmed against them. The demands were related to the assessable value of goods cleared by the applicants to their customers. The issue in question was whether the cost of drawings and designs supplied free of cost by the principal manufacturer, who had discharged duty liability on the final products, should be included in the assessable value by the applicants. The applicants argued that they were under a bona fide belief that the drawings and designs supplied free of cost were not includable in the assessable value, citing legal precedents to support their contention. However, the Revenue argued that as per the Valuation Rules, 2000, the value of drawings and designs should be included in the assessable value. The Revenue contended that the extended period was rightly invoked, emphasizing that the principal manufacturer paying duty on the final product did not exempt the applicants from including the cost of designs and drawings in the assessable value.The Tribunal noted that the applicants had not included the cost of designs and drawings charges in the assessable value, which were supplied free of cost by the principal manufacturer. Referring to a previous case involving a similar scenario, the Tribunal found that if the appellants had paid duty on the full value of the goods inclusive of the raw materials cost, the principal manufacturer could have taken credit on the duty paid. The Tribunal observed that the issue was debatable, considering the legal precedents and the fact that the applicants had already paid the duty demand along with interest for the normal period of limitation. Therefore, the Tribunal waived the requirement of pre-deposit of the balance amount of duty, interest, and penalty, staying the demand during the pendency of the appeal.In conclusion, the Tribunal granted the waiver of pre-deposit of the demands confirmed against the applicants, considering the debatable nature of the issue regarding the inclusion of the cost of drawings and designs in the assessable value. The Tribunal emphasized that the applicants had already complied with the provisions of the Central Excise Act by paying the duty demand along with interest for the normal period of limitation.