1998 (4) TMI 221 - AT - Central Excise

Court Upheld Duty Payment for Design Charges in Debit Notes for Cranes

GARLICK ENGINEERING Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY

GARLICK ENGINEERING Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY - 1998 (102) E.L.T. 26 (Tribunal) Issues:Dispute regarding assessable value and duty payment for charges collected under separate debit notes; Applicability of Notification No. 120/75; Time limitation for show cause notice issuance.Analysis:1. The appellant was engaged in manufacturing Electric Overhead Travelling Cranes (EOT Cranes) and paid duty based on prices in invoices. The dispute arose when the Department alleged that charges for design, engineering, transportation, and commissioning collected under separate debit notes were not included in assessable value, leading to a demand for differential duty for the period from 1-4-1984 to 30-9-1985. The Collector confirmed the demand, prompting the appeal.2. Design and engineering charges for EOTs, tailored to buyers' specifications, are integral to manufacturing and must be part of the assessable value under Section 4(1)(a) of the Act, irrespective of being shown in separate debit notes.3. The appellant argued that benefits under Notification No. 120/75 allowed exemption beyond invoice prices, citing a Supreme Court decision. However, the Court differentiated the case, emphasizing that assessable value must correspond to the invoice price under the Act, preventing deliberate underreporting for duty exemption.4. Charges for design and engineering are deemed part of the invoice price, necessitating duty payment, regardless of being listed in separate debit notes. The lower authority's view on duty liability for these charges was upheld.5. In contrast, charges for transportation, installation, and commissioning at buyers' sites were deemed separate services, not affecting assessable value as EOTs were manufactured and tested at the appellant's factory before installation, warranting no duty demand on these charges.6. The show cause notice's time limitation was contested by the appellant, claiming the Department's prior awareness of similar charges collected under debit notes. However, the Court found no evidence of Departmental knowledge for the relevant period, upholding the invocation of the larger limitation period due to alleged suppression of facts.7. The Court directed quantification of charges related to design and engineering for debit notes not exclusively focused on these aspects, necessitating a reduction in demand for charges unrelated to design and engineering, requiring further assessment by the adjudicating authority.8. The order confirmed duty demand for design and engineering charges but set aside the demand for transportation, installation, and commissioning charges, directing the adjudicating authority to recalculate duty and penalty amounts and provide the appellant with a hearing opportunity, ultimately allowing the appeal.