Assessable value and buyer-supplied designs: no notional addition where the drawings had no commercial value and were in the public domain.

Buyer-supplied drawings and designs may be treated as additional consideration and included in assessable value under the Central Excise Valuation Rules, 2000 read with Explanation I. On the facts recorded, however, the designs were about 22 years old, already in the public domain, the copyright had ceased to apply, and a Chartered Engineer certified them as having nil value. In the absence of commercial value, no notional addition was justified, and the valuation adjustment was set aside in favour of the assessee.

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Issues: Whether the value of drawings and designs supplied free by the customer was includible in the assessable value of the manufactured goods under the Central Excise valuation rules.

Analysis: Buyer-supplied drawings and designs can form part of the assessable value as additional consideration under Rule 6 of the Central Excise Valuation Rules, 2000 read with Explanation I, because such items used in production are ordinarily liable to be added. On the facts found, however, the designs were about 22 years old, the copyright was no longer applicable, they were already in the public domain, and the Chartered Engineer certified them to have nil value. In these circumstances, no addition was justified on account of the designs.

Conclusion: The addition made towards the value of the designs could not be sustained and the issue was decided in favour of the assessee.

Final Conclusion: The impugned valuation adjustment was set aside and the appeals were allowed.

Ratio Decidendi: Where customer-supplied drawings or designs are otherwise includible as additional consideration in excise valuation, no notional addition can be made if the evidence shows that such material had no commercial value and was available in the public domain.

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