2017 (3) TMI 606

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....ratuity in the computation of assessable value in terms of CAS-4. The appellant is however challenging imposition of penalty. It has been argued that CAS-4 came into being in the year 2003 and immediately thereafter appellant paid the said differential duty along with interest. It has been argued that period under dispute is prior to introduction of CAS-4 valuation. It has been argued that they were of bonafide belief that the bonus and gratuity need not to be included in the value for the purpose of transfer of goods from one unit to another. In these circumstances, they have sought relief of penalty imposed. 4. Ld. A.R. argued that the matter was clarified by CBEC in 1996. He particularly relied on the decision of Hon'ble Apex Court in case of Commissioner of C. Ex., Ahmedabad Versus Asarwa Mills [2015 (319) E.L.T. 216 (S.C.)]. He argued that in the said case same issue was agitated before the Hon'ble Apex Court and Hon'ble Court held that extended period cannot be invoked for the period April, 1994 to September, 1996 only. 5. We have gone through rivals submissions. 6. We find that decision of the Hon'ble Apex Court in case of Asarwa Mills(supra) is on the identical sub....

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.... view of the above decision, it is noticed that element of bonus is common between facts of the said case decided by the Hon'ble Apex Court and question at hand. In view of the specific observations of the Hon'ble Apex Court, the demand beyond the normal period of limitation is set aside. The penalty under Section 11AC is also set aside. The appeal is partly allowed. (b) Appeal No. E/1513/06 & E/1611/06 These appeals have been filed by M/s. Century Enka Ltd in respect of valuation of the goods manufactured by the appellant and transfer to their own plant located at Mahad. 2. The issue involved in the present case is that if in the valuation of such goods on basis of CAS-4 certificate royalty needs to be included while determined the value or not. In respect appeal No. E/1513/06 for the period July, 2000 to March, 2002, the adjudicating authority while confirming demand, penalty has been imposed under Section 11AC. In respect of Appeal No. E/1611/06 for the period April, 2002 to March, 2003, while demand has been confirmed alongwith interest, penalty under Rule 26 has not been imposed. Aggrieved by the said Orders, the appellant is before this Tribunal. ....

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.... Sales Note : To arrive at value at different points as indicated above adjustment with opening and closing stock is necessary at following different points : (a) opening and closing stock of raw materials (b) opening and closing stock of work-in-progress & finished goods In terms of CAS-1 the research and development cost is part of the cost of production.. In terms of CAS-1 in para 6.2.6 prescribed as under: 6.2.6 Direct expenses are the expenses other than direct material or direct labour which can be identified or linked with the cost centre or cost object. 6.2.7 Examples of direct expenses are * Expenses for special moulds required in a particular cost centre * Hiring charges for tools and equipments for a cost centre * Royalties in connection to a product * Job processing charges etc. It can be seen that expenses of royalties in connection to the product expenses for special moulds, hiring charges for tools and equipments for cost centre and job processing charges are includible. Para 6.3.7 of CAS-1 prescribed as under : 6.3.7 Selling costs ar....

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....e cord and tyre cord fabrics. (B) CE desires to have access to and to obtain from AIF the right to use in its Plants in Pune and Mahad, India, the state-of-the-art technologies employed by 'AIF' and its affiliates, with regard to the said yarns, tyrecord and tyre cord fabrics. "Know how" and "Product" are as defined as under: 1.3. "Know-how" shall mean full knowledge, technical know how and experience including chemical and technical research in the field of manufacture, treatment and processing of the products, including designs, specifications, source of availability of raw material, additives, auxiliary chemicals, specifications of material, components, chemicals intermediates, detailed process sequences, labour and output norms, enery consumption norms and other cost parameters, pollution control and effluent discharge testing and qualify control procedures, as available. "Product" shall mean polyester and nylon(polyamide-6) textile filament yarns, polyester and nylon(polyamide-6) industrial yars, tyre cord and tyre cord fabrics. Article 2-LICENCE reads as under: 2.1 For the term of this Agreement, 'AIF' hereby gra....

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.... though termed as royalty, is actually Technical knowhow fee. The same is charged on the sale price of the final product. It actually is consideration for technical knowhow. Thus in terms of CAS-1 as well as CAS-4 same is includible in the assessable value. 9. Next issue raised by the appellant is that there are some product which do not qualify as product in terms of the agreement. It has been argued that addition if any of this royalty can be made in respect of product defined under agreement. We find substantial force in the argument. Chips manufactured by the appellant are not covered by the definition of the product and thus royalty paid, if any, cannot be added for the purpose of arriving at assessable value of the chips in terms of CAS-4. 10. The appellant have relied on the decision of this Tribunal in this case of Glaxo Smithkline Cons. Healthcare Ltd(supra). Para 6 of the order reads as under: "6. We have considered the various points urged by both the sides carefully. The only issue to be decided is whether the royalty charges are includible at the bulk stage. We find that the Central Excise authorities in Patiala and Sonepet had already decided the issue ....

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....r and they are supposed to pay 3.5% as subject to the Indian taxes, on the net works billing price of the products less the landed cost of imported components used in the manufacture of final products. 9. Since the components/parts manufactured by the appellants are being used captively the value thereof is required to be determined under the Valuation Rules and the value is being determined on the basis of costing basis after adding the profit element in the cost. After issuance of the circular in 2003 that costing is to be done as per the CAS4. It is quite clear that the amount of the royalty charges will be covered under the direct expenses and will required to be added to the cost of the product under assessment. Since under the disputed period the goods were being assessed on the basis of costing principles, there is no reason not to include the royalty charges to the cost of the product prior to issuance of the circular also. Since the cost of the product is being arrived for the purpose of determination of assessable value the same principles as mentioned in CAS4 are applicable for the past period also. Therefore, we hold that the royalty charges are required to be ....