1990 (11) TMI 222 - AT - Central Excise

Inclusion of Design Charges in Assessable Value: Importance of Disclosure and Compliance

The Tribunal held that charges for designing and fabrication drawings are integral to the manufacturing process and must be included in the assessable ... Demand - Limitation Issues:1. Inclusion of designing and fabrication charges in the assessable value.2. Compliance with Notification No. 120/75-CE dated 30th April, 1975.3. Invocation of extended period of limitation.Analysis:1. The appeal addressed whether charges for designing and fabrication drawings, raised through separate bills, should be included in the assessable value. The appellant argued against their inclusion, stating these charges are not part of the final product. However, the respondent contended that such charges are integral to the manufacturing process. Citing a previous judgment, it was established that costs for drawing and designing are essential elements of machinery costs and must be considered in the assessable value. The Tribunal emphasized that failure to disclose such costs amounts to suppression of facts, warranting the application of the extended period of limitation.2. The respondent also raised the issue of non-compliance with Notification No. 120/75-CE dated 30th April, 1975, which required intimation of charging designing and consultancy charges to the Department. As the appellant failed to provide this information, it was argued that the extended period of limitation should be invoked. The Tribunal found merit in this argument, highlighting the importance of transparency in disclosing such charges to tax authorities.3. In the judgment, the Tribunal referenced similar cases to support its decision. In one instance, it was clarified that technical consultancy fees could be considered part of the assessable value if they were related to customizing products for specific customers. However, if the consultancy was solely for advising customers on product usage and not for designing, it would not impact the assessable value. The Tribunal concluded that the appellant's failure to disclose relevant charges constituted suppression of facts, justifying the invocation of the extended period of limitation. Consequently, the appeal was dismissed based on both merit and limitation grounds.