Drawings and designs may form assessable value under Rule 6; limitation plea did not justify full waiver.
For pre-deposit and stay, the Tribunal held that the cost of drawings and designs was prima facie includible in assessable value under Rule 6 of the Central Excise Valuation Rules, because buyer-supplied engineering documentation appeared to have an indirect nexus with manufacture and sale. It noted, however, that the method of quantification by adopting 10% of turnover required closer scrutiny. The plea of limitation and absence of suppression was also not made out at the prima facie stage, as material facts about the drawings were not disclosed and were gathered through investigation. Complete waiver was therefore refused and limited pre-deposit was directed.
Issues: (i) whether, for the purpose of pre-deposit and stay, the cost of drawings and designs was prima facie includible in the assessable value under Rule 6 of the Central Excise Valuation Rules; (ii) whether the plea of limitation and absence of suppression justified complete waiver of pre-deposit and stay.
Issue (i): whether, for the purpose of pre-deposit and stay, the cost of drawings and designs was prima facie includible in the assessable value under Rule 6 of the Central Excise Valuation Rules.
Analysis: Rule 6 treats the value of additional consideration flowing directly or indirectly from the buyer to the assessee as part of assessable value, including the value of drawings and designs supplied free of charge or at reduced cost for use in connection with production and sale. The contract terms relating to engineering documentation indicated, prima facie, that drawings supplied by the buyer had to be used in manufacture, and the specifications were developed from such drawings. On that basis, an indirect nexus between the goods and the drawings/designs could not be ruled out at the interim stage. The Tribunal, however, noted that the manner of quantification by taking 10% of turnover required closer scrutiny.
Conclusion: The challenge to applicability of Rule 6 did not justify complete waiver at this stage, though the method of valuation required further consideration.
Issue (ii): whether the plea of limitation and absence of suppression justified complete waiver of pre-deposit and stay.
Analysis: The show cause notice invoked the proviso to Section 11A(1) on the allegation of suppression with intent to evade duty. The Tribunal found the plea of limitation not convincing at the prima facie stage because statements of company functionaries had been recorded, and the material facts concerning drawings were not disclosed to the department but gathered through investigation. The reference to Section 14 supported the inference that the appellant had not disclosed the relevant facts when expected to do so.
Conclusion: The plea of limitation was not made out sufficiently to warrant complete waiver of pre-deposit.
Final Conclusion: The application for waiver and stay was not accepted in full, and the appellant was directed to make a limited pre-deposit as a condition for further progress in the proceedings.
TaxTMI 
AI Drafter ✕
TaxTMI 
