2015 (1) TMI 764 - AT - Central Excise

Inclusion of Drawing Charges in Assessable Value Upheld, Duty Demand Time-Barred, Penalty Unjustified

M/s. Larsen & Toubro Ltd. Versus CCE, Chennai

The Tribunal ruled that drawing and design charges should be included in the assessable value of goods. However, the demand for duty was time-barred, and ... Extended period of limitation - Valuation - inclusion of value of Design and drawing supplied free of cost - Differential demand - Held that:- It is seen that in the case of other contractor, the demand was dropped. It is a case of interpretation of provisions of Valuation Rules with the decision of Hon’ble Supreme Court in the case of Ujjagar Prints (1988 (11) TMI 106 - SUPREME COURT OF INDIA) and other decisions. There is no material available that the appellant suppressed the facts with intent to evade payment of duty. The appellant contended that there is no intention to evade payment of duty insofar as, if the appellant would pay the duty, the other companies would avail the CENVAT credit. Taking into account of overall facts and circumstances of the case, we are of the view that the extended period of limitation cannot be invoked in the present case. - Decided in favour of assessee. Issues Involved:1. Inclusion of drawing and design charges in the assessable value of goods.2. Applicability of Rule 5 of the Central Excise (Valuation) Rules, 1975.3. Invocation of the extended period of limitation for demand.4. Imposition of penalty under Rule 173Q(1)(a) of the Central Excise Rules, 1944.Issue-wise Detailed Analysis:1. Inclusion of Drawing and Design Charges in the Assessable Value:The appellants argued that they did not receive any money for the drawing and design supplied for the manufacture of excisable goods, and thus, there was no question of adding drawing and design charges to the price of the fabricated items. The Tribunal found that M/s. Durr India paid Rs. 31,41,000 to Durr, Germany, for the design and drawing charges, which were necessary for the manufacture of the goods. The Tribunal held that the cost of drawing and design should be included in the assessable value of the goods, as these were essential for the manufacturing process and were provided by M/s. Durr India.2. Applicability of Rule 5 of the Central Excise (Valuation) Rules, 1975:The appellants contended that Rule 5 could not be invoked as there was no additional consideration flowing from the buyer to the assessee. However, the Tribunal referred to the decision in the case of Swil Ltd. and Macawber Beekay Ltd., which held that when the price of the finished goods is fixed and the necessary drawings are supplied free of cost, the price cannot be considered the sole consideration. Therefore, the Tribunal concluded that Rule 5 of the old Valuation Rules was applicable, and the drawing and design charges should be added to the assessable value.3. Invocation of the Extended Period of Limitation for Demand:The appellants argued that the entire demand was barred by limitation and there was no suppression of facts with intent to evade payment of duty. The Tribunal agreed, noting that the design and drawing charges were supplied free of cost and there was no material evidence of suppression of facts. The Tribunal also considered that if the appellant had paid the duty, the other companies would have availed CENVAT credit, indicating no intention to evade duty. Therefore, the extended period of limitation could not be invoked.4. Imposition of Penalty under Rule 173Q(1)(a) of the Central Excise Rules, 1944:Given the conclusion that the demand for the extended period was not sustainable, the Tribunal also set aside the penalty imposed under Rule 173Q(1)(a). The Tribunal found that the case involved interpretation of valuation provisions and there was no intent to evade duty, thus penalty was not justified.Conclusion:The Tribunal held that while the drawing and design charges should be included in the assessable value of the goods, the demand for duty was barred by limitation and the penalty was not sustainable. The impugned order was set aside on the grounds of limitation.