2017 (3) TMI 996

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....y on such items, availed credit and supplied the same to AVTECH on payment of duty. On receipt of these duty paid, but free of cost materials, AVTEC availed credit and utilized the same when the final, product- power units, were cleared to FIPL. The duty so paid on power units by AVTEC is again availed as cenvat credit by FIPL. The assessable value of power units manufactured and cleared by AVTEC to FIPL is subject matter of dispute in the present appeals. The value for excise purpose, of power units, included the price of power units, value of free of cost components, as declared by FIPL, entry tax on free of cost components and amortised cost of tools supplied by FIPL. The point of dispute in the present appeal is relating to inclusion of royalty charges in the value of power units manufactured and cleared by AVTEC to FIPL. The Revenue contended that the money value of drawing, technical know-how and assistance, received free of cost by AVTEC from FIPL, is required to be included in the assessable value of power units. A differential duty of Rs. 4,80,85,580/- was confirmed towards the duty liability on such charges. The Revenue calculated differential duty by adding 5% in the val....

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.... this transaction. Ld. Counsel relied on the decision of the Tribunal vide Final Order No.A/53881-53886/2016 dated 29.09.2016 in the appellant's own case with reference to another motor vehicles manufacturer. (d) The substantial penalty imposed on FIPL under Rule 26 is legally not sustainable. The said rule contemplates that penalty only on natural person because the activity, which are mentioned therein, will involve physical handling of goods. A company cannot be penalized under Rule 26. Reliance was placed on the decisions of the Tribunal in this regard. 3. Ld. AR reiterated the findings recorded in the impugned order. He submitted that the principal manufacturer of FIPL chosen to supply free of cost materials on payment of duty to AVTEC. AVTEC received the goods and availed the credit. The manufactured power units were also cleared on payment of duty by AVTEC to FIPL, who availed credit on the same. The appellants have chosen not to follow the procedure under Rule 4 of the Cenvat Credit Rules, 2004. Now, at the time of deciding the proper valuation of the dutiable power units, the appellants are raising a point that they need not have paid duty at all, in terms of t....

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....e relevant portion of the said order is as follows:- "11. The only other main issue is regarding loading of 3% in the value of FOC materials on the ground of royalty fees paid by GMI to ISUZU. We find the reasoning and methodology while arriving at such percentage of loading by the original authority is devoid of merit. GMI entered into an agreement with ISUZU for drawing and specification and paid royalty charges for this. Admittedly, the agreement is in respect of technical information and support from ISUZU with reference to entire model of car and not for transmission assembly only. The agreement encompasses a host of activities for the entire vehicle, whereas in the present case Avtec are not engaged in the manufacture of entire vehicle and they are involved only in manufacture of certain intermediary transmission assembly etc. which goes into the manufacture of the vehicle. Further, we note provision of Rule 6 of Valuation Rules are applicable to situation where additional consideration is flowing from buyer to seller. In the present case admittedly GMI are providing certain drawings and designs to Avtec based on which the products are to be manufactured. We have per....

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....ile we uphold, on merit, the proposal made by the Revenue for adding the value attributable to the engineering, drawing, design, technical know how supplied by FIPL to AVTEC in the value of the power units cleared by AVTEC, the quantification has to be done on factual and rational basis. We note that the appellants also strongly contended that the same methodology as followed by FIPL for payment of royalty to their foreign collaborators can be adopted for arriving at the notional value attributable to such technical know-how, drawing, etc. provided by FIPL to AVTEC. We are in agreement with the said proposal as the same will be both rational and reasonable. The quantification of royalty as 5% of net ex factory sale price subject to certain exclusions has been agreed upon between FIPL and FORD Motor Company, USA. In this connection, we refer to the Article 10.1 of the agreement dated 19.08.1996. We find applying the ratio of the said calculation, the additional value towards design and drawing in respect of the power units manufactured and cleared by AVTEC also can be arrived at. 7. The demand for extended period was strongly contested by the appellant. We note that in the Final ....