TaxTMI 
TaxTMI 
2026 (9) TMI 1592
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....e Limited (Ford) by injection moulding process using iron moulds. The moulds required for this purpose are procured by the appellant from third party manufacturers, and Cenvat Credit is availed on the same. These moulds are thereafter sold to Ford on payment of VAT on an as is where is basis. The moulds, however, are retained by the appellant in their factory for use in the manufacture of bumpers. The appellant amortises the value of the moulds and includes the amortised cost in the sale price of the bumpers at the time of clearance to Ford, discharging Central Excise duty thereon. This practice is not in dispute. 3. During audit conducted by the department in the year 2014, it was found on perusal of the appellant's accounts and service tax returns for the period 2012-2013 and 2013-2014 that the appellant had collected service charges from Ford for carrying out modifications to the moulds. The modifications were carried out on the instructions of Ford, and the appellant had discharged service tax on the service charges so collected. The department formed the view that these service charges towards mould modification were required to be included in the amortised cost of the ....
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....inherent value of the mould ought to be included in the assessable value. He pointed out that in terms of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CEVR, 2000), the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee is to be included in the assessable value. However, the modification charges collected from Ford were taxed as a service on which service tax stood duly discharged; such charges, therefore, cannot be characterised as additional consideration towards the manufacture of bumpers. Explanation 1 to Rule 6 provides for inclusion of the value of tools, dies, moulds, drawings, blueprints, technical maps and charts and similar items used in the production of goods when provided by the buyer free of cost to the manufacturer. The appellant had concededly included the amortised value of the moulds in the price of the bumpers and had discharged excise duty on the same; the modification charges were for a wholly distinct service. 8. Learned Counsel further contended that the decision in ISMT Ltd. v. CCE, Pune, 2017 (6) GSTL 298 (Tri. Mum.), relied upon by the Appellate Auth....
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..... He also argued that where the issue is one of interpretation of statutory provisions, the allegation of suppression is unsustainable and the extended period cannot be invoked. Reliance was placed on the decisions in Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay, 1995 (78) ELT 401 (SC), Cosmic Dye Chemical v. Collector, 1995 (75) ELT 721 (SC), Padmini Products Limited v. CCE, 1989 (43) ELT 195 (SC), Anand Nishikawa Co. Ltd. v. CCE, 2005 (188) ELT 149 (SC), Continental Foundation Joint Venture v. Commissioner of Central Excise, Chandigarh I, 2007 (216) ELT 177 (SC), Uniworth Textile v. CCE, 2013 (288) ELT 161 (SC), M/s. RU's Marketing and Creative Unit v. CCE, 2026 (4) TMI 151, CESTAT Chennai, Ameya Foods v. CCE, 2024 (160) taxmann.com 26 (SC), Caprihans India Ltd. v. CCE, Surat, 2015 (10) TMI 444 (SC), Densons Pultretaknik v. CCE, 2003 (155) ELT 211 (SC), and Mahanagar Telephone Nigam Ltd. v. Union of India, 2023 (73) GSTL 310 (Del.). 11. Learned Counsel therefore submitted that penalty is not imposable and prayed that the appeal be allowed. SUBMISSIONS OF THE RESPONDENT 12. Shri N. Satyanarayana, learned Authorised Representative appearing fo....
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....ion thereto. Separately, from time to time, Ford requires modifications to the moulds, and the appellant carries out these modifications and collects service charges therefor, discharging service tax on the same. The demand arises because the department takes the view that these modification charges should also be treated as part of the amortised cost of the moulds and thereby included in the assessable value of the bumpers. 17. Rule 6 of the CEVR, 2000 applies where price is not the sole consideration for sale, and provides that the value of excisable goods shall include the transaction value together with the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Explanation 1 to Rule 6 further provides that the additional consideration shall include, among other things, the value of tools, dies, moulds, drawings, blueprints, technical maps and charts and similar items used in the production of goods when provided by the buyer free of cost or at reduced cost to the manufacturer. 18. Two distinct questions emerge. First, whether the modification charges are additional consideration flowing from Ford to the appellant within ....
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....he cost of patterns in the assessable value of castings for purposes of excise valuation. It does not address the question whether service charges for modification or repair of moulds, on which service tax has been discharged, must also be treated as part of the amortised cost. The Circular cannot be stretched to cover a situation it was never intended to address. 22. The reliance placed by the Appellate Authority on the decision in ISMT Ltd. v. CCE, Pune, 2017 (6) GSTL 298 (Tri. Mum.) is misconceived. That case dealt with product development costs having a direct nexus to the goods being manufactured. The present case concerns modifications and repairs carried out on existing moulds, which are activities of an entirely different character. As the Supreme Court observed in Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd., 2003 (2) SCC 111, a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision. Moreover, ISMT Ltd. does not lay down any proposition in law as the Hon'ble Bombay High Court has in ISMT Ltd. v. UOI, 2019 (368) ELT 932 (Bom.) found that the Tribunal records the appellant's submission that the appella....
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.... charges represent consideration for a service, are not additional consideration for the bumpers, and do not fall within the ambit of Explanation 1 to Rule 6. The demand of duty on this count is accordingly not sustainable on merits. Issue B: Whether the extended period was rightly invoked 25. Though the demand has been found unsustainable on merits, inasmuch as the impugned order reversed the Adjudicating Authority's finding on limitation, and the manner of that reversal raises questions of some significance touching the manner in which the power to invoke the extended period is exercised, we consider it appropriate to record our finding on limitation as well. 26. The proviso to Section 11A(1) of the Act, as it stood at the relevant time, permitted invocation of the extended period of five years only where the non levy, non payment, short levy or short payment was by reason of fraud, collusion, wilful misstatement, suppression of facts, or contravention of any of the provisions of the Act or the rules made thereunder, with intent to evade payment of duty. The burden of establishing the ingredients that attract the extended period lies squarely on the Revenue. 27. T....
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....ts activities, it cannot be said that there was any misstatement of facts or fraud, and the extended period is not invokable. The same High Court, in Commissioner of Central Excise and Customs, Nashik v. Mahindra and Mahindra Ltd., 2018 (11) GSTL 126 (Bom.), went further and imposed costs of one lakh rupees on the Revenue for filing a frivolous appeal on the settled issue of limitation where audit had been conducted, observing with some asperity that Revenue officials remained seemingly impervious to the law laid down by the Supreme Court and by various benches of the Tribunal on the prerequisites for invoking the extended period. 30. Further, the issue in dispute is genuinely one of interpretation. Whether mould modification charges, on which service tax has been discharged, are required to be treated as part of the amortised cost of the moulds for excise valuation is a question on which reasonable minds may differ. Rule 6 and Explanation 1 thereto do not expressly cover service charges for modification work on moulds whose cost has already been amortised. The question involves interpretation of the scope of these provisions and their interplay with the service tax already disc....