2013 (11) TMI 1287 - AT - Central Excise

Tribunal decision: Royalty value affects duty, time limits enforced. Deposit required for appeal.

The Tribunal ruled that the proportionate money value of royalty paid by a company should be added to the assessable value of goods supplied, rejecting ... Proportionate money value of royalty to be added in the assessable value or not – Amount paid for engine and transmission supplied – Waiver of Pre-deposit – Extended period of limitation – Held that:- As per the provisions of Section 11A(1) of the Central Excise Act, 1944, the Show Cause Notice is required to be issued within 1 year of the relevant date - The demand for the period from April 2005 to December 2009 was raised by Show Cause Notice dated 07.05.2010 by invoking extended period of limitation. - the demand upto March 2009 is barred by limitation. The appellants have made a strong case for waiver of pre-deposit - the department contended that royalty to be paid on the total value of the goods cleared from the factory – the appellant directed to deposit an amount of Rs.20 lakhs as pre-deposit – upon such submission duty and penalty to be stayed till the disposal – Partial stay granted. Issues:1. Whether the proportionate money value of royalty paid by a company to another company is required to be added to the assessable value of goods supplied.2. Whether the demand raised by the Show Cause Notice is within the period prescribed by law.Analysis:1. The main issue in this case revolves around the consideration of whether the money value of royalty paid by one company to another should be included in the assessable value of goods supplied. The applicant, engaged in manufacturing engines and transmissions, was alleged to have avoided duty payment by not including the royalty element in the cost of components supplied Free of Cost (FOC) by the other company. The appellant argued that the royalty paid by the other company was on the value of cars manufactured and sold, and if considered, should be after deducting the value of imported material and standard components. The appellant contended that if the actual royalty rate is applied, the duty payable would be substantially lower than the amount claimed by the authorities.2. Another significant issue raised was the timeliness of the demand raised through the Show Cause Notice. The demand for a specific period was raised beyond the one-year limitation period prescribed by Section 11A(1) of the Central Excise Act, 1944. The Tribunal noted that the demand for a certain period was barred by limitation, and the amount claimed for that period could not be enforced. The Tribunal considered the arguments presented by both parties and decided that the appellant should deposit a certain amount as a condition for hearing the appeal. The remaining duty and penalty were stayed pending the appeal's disposal, subject to compliance with the deposit requirement.In conclusion, the Tribunal addressed the issues of including royalty in the assessable value of goods supplied and the timeliness of the demand raised in the Show Cause Notice. The decision highlighted the importance of complying with legal provisions regarding the limitation period for raising demands and the need for a balanced approach in determining duty liabilities. The Tribunal's decision to require a deposit for hearing the appeal demonstrated a practical approach to resolving the dispute while ensuring compliance with procedural requirements.