2008 (5) TMI 286

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..../- received by the respondent for the preparation of designs, drawings, patterns, jigs, etc. is set aside. 2. The respondent, a company incorporated under the provisions of the Companies Act, 1956 was manufacturing machine tools, their accessories, high grade castings, pollution control equipments and other incidental and ancillary equipments. It owned and operated a main machine manufacturing factory at Harihar. It used to accept orders to manufacture engineering machines as per the drawings, patterns, jigs, fixtures and tools etc. developed by it. The respondent entered into such an agreement dated May 10, 1991 with ITC for manufacturing the machines. The agreement stipulated that the machines would be manufactured as per the specificati....

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....ideration in the instant appeal is whether the amount of Rs. 43 lakhs received by the respondent towards charges for designs, drawings, tooling, jigs and fixtures etc. as per the agreement dated May 10, 1991 could have been loaded on the value of the machine made and delivered subsequently as per the separate written orders. 7. In order to resolve this controversy, it would be relevant to notice certain clauses of agreement dated May 10, 1991 :- "(a) The company shall place upon MKL orders from time to time for manufacturing the machines and all such orders shall be in writing. (b) MKL shall manufacture the machines strictly in accordance with the  specifications, the prototype and the drawings and patterns prepared by it and appro....

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....rue that the charges for drawings, designs etc. have to be added to the assessable value of the machines manufactured, based on use of such drawings, designs, jigs, fixtures, tooling etc. However, before adding the value of the drawings etc, it has to be established that the consideration had a nexus with the negotiated price of the assessable goods under clearance, i.e. machines in the instant case. Without establishing any such nexus, the Commissioner of the Central Excise could not have demanded the duty on the additional amount of consideration of Rs. 43 lakhs. The agreements, i.e. the written orders, for the supply of four machines as per the gate passes in this case were not considered/relied upon in the original proceedings. Therefor....