2005 (7) TMI 153 - AT - Central Excise

Tribunal includes design charges in product value, upholds penalty for duty evasion.

The Tribunal upheld the Commissioner's decision to include 'Development and Maintenance of Design and Artwork' charges in the assessable value of finished ... Valuation (Central Excise) - Penalty - Imposition of - Suppression of facts Issues Involved:1. Inclusion of Development and Maintenance of Design and Artwork charges in the assessable value of finished products.2. Allegation of suppression of facts and imposition of penalty.Issue-wise Detailed Analysis:1. Inclusion of Development and Maintenance of Design and Artwork charges in the assessable value of finished products:The primary issue revolves around whether the charges recovered through debit notes for 'Development and Maintenance of Design and Artwork' should be included in the assessable value of the finished product, i.e., flexible packaging laminates. The Tribunal had previously remanded the matter to the Commissioner to consider cost sheets and cost accountant certificates provided by the appellant, which were allegedly not considered initially.The Commissioner, in the impugned order, found that the charges recovered separately were not included in the amortized cost of the cylinders. This conclusion was based on the observation that the cost sheets and certificates were vague and did not confirm whether the service charges were considered for amortization. The Commissioner reasoned that if these charges were included in the amortized cost, there would be no need to recover them separately through invoices or debit notes.The appellant argued that the entire cost of the cylinder, including processing charges and excise duty, was amortized, and thus, the amounts recovered separately should not be added to the value of the cylinders. However, the department contended that the charges for 'Development and Maintenance of Design and Artwork' were not included in the value of the finished product, as evidenced by the separate recovery through debit notes.The Tribunal found that the appellant's stance had changed over time, and the cost sheets did not mention the charges recovered by debit notes. The Tribunal concluded that the charges recovered through debit notes were not included in the invoice value of the finished product, as no customer would pay these charges separately if they were already included. Therefore, the Tribunal upheld the order confirming the demand, finding no evidence that the costs were fully amortized and recovered on the invoice after payment of duty.2. Allegation of suppression of facts and imposition of penalty:The Commissioner imposed a penalty of Rs. 1 crore under Rule 173Q of the Central Excise Rules, 1944, on the grounds that the appellant suppressed the fact of recovering additional amounts as service charges from customers, thereby evading duty. The appellant argued that there could be no suppression since the facts were already known to the department, as evidenced by an earlier show cause notice dated 1-2-1994.The Tribunal, however, found that the appellant had not disclosed the relevant facts in the assessment documents during the period in question. Therefore, the imposition of a penalty of Rs. 1 crore on the evasion of duty amounting to Rs. 2,20,11,957/- was justified and upheld.Conclusion:The Tribunal upheld the impugned order, confirming the demand and the penalty imposed. The appeal was consequently dismissed.