Tribunal excludes customer design costs from assessable value, grants relief to appellants

The Tribunal ruled in favor of the appellants, holding that the cost of designs and drawings supplied by customers should not be included in the assessable value of the final products. The Tribunal emphasized that the appellants' role was limited to manufacturing components based on customer dimensions, not designing the products themselves. As a result, the appeal was allowed, and consequential reliefs were granted to the appellants. The decision was rendered on 07.08.2018.

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Issues:
Whether designs and drawings supplied by the appellant's customers are includible in the assessable value of the final products.

Analysis:
The case involved the appellants, engaged in manufacturing engineering goods for cement, sugar plants, and thermal power stations. The issue arose when the Revenue alleged that the appellants did not include the cost of design and drawing received from customers in the assessable value of the final products. The Revenue issued a show-cause notice, leading to an Order-in-Original confirming the demand, interest, and penalty. The appellants contended that the designs and drawings provided by customers related only to the plant and not the components manufactured by them. The Tribunal had to decide whether the designs and drawings should be included in the assessable value of the final products.

During the hearing, the appellants argued that their manufacturing process involved only cutting and welding of MS plates to customer specifications, which did not require specialized drawings. They emphasized that the designs and drawings were specific to a part of the machinery, and any additional cost should pertain to the vendor's design and drawing. The appellants challenged the unilateral adoption of 10% of the bill value based on a single document from a customer, citing a precedent from the Allahabad Bench of the Tribunal.

The Tribunal examined the materials on record and the arguments presented. It noted that the designs and drawings supplied by customers were intended not to be valued separately, as evidenced by commercial terms and conditions. The Tribunal observed that the drawings provided were mere transcriptions of component dimensions, lacking technical details. Relying on precedents, the Tribunal held that the cost of drawings supplied by customers should not be included in the assessable value of the final product. The Tribunal emphasized that the appellants' work was limited to manufacturing components based on customer dimensions, not designing the products themselves.

Consequently, the Tribunal allowed the appeal of the assessee, granting consequential reliefs. The decision was pronounced in open court on 07.08.2018, with the Tribunal ruling in favor of the appellants based on the lack of justification to include the cost of drawings in the assessable value of the final product.

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