2007 (5) TMI 435 - AT - Central Excise

Demand - Time Limitation - Cost escalation by proforma invoice - Valuation - Held that - the differential duty demand on the cost escalation element of the assessable value determined by the Commissioner is barred by limitation. Valuation - includibility - special packing charges - Held that - the appellants have made a sustainable case against the demand of duty on special packing charges. Valuation - includibility - whether the bonus is required to be included in the assessable value of the bricks? - Held that - bonus not includible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Differential duty demand on cost escalation in imported raw material.
2. Inclusion of special packing charges in assessable value.
3. Claiming bonus from buyers and its impact on assessable value.

Analysis:

1. Differential duty demand on cost escalation in imported raw material:
The judgment revolves around a case where the Commissioner of Central Excise demanded a differential duty from the appellants for refractory bricks cleared during a specific period. The appellants issued proforma invoices to buyers for various claims, including cost escalation due to exchange rate variation. The Commissioner included both received and receivable amounts in the assessable value for duty recovery. The appellants argued limitation against the demand, stating that the proforma invoices were issued beyond the normal period. The tribunal found no sustainable challenge against the demand but acknowledged that the intent to evade duty was not established, especially for a Public Sector Undertaking. The differential duty demand related to cost escalation was deemed barred by limitation.

2. Inclusion of special packing charges in assessable value:
The second issue pertained to special packing charges claimed by the appellants from buyers. The Commissioner included these charges in the assessable value of goods. However, the appellants argued that such charges should not be included based on legal precedents. They contended that the special packing was buyer-specific, not essential for the goods themselves. Citing previous tribunal and apex court decisions, the tribunal agreed with the appellants, ruling against the demand for duty on special packing charges.

3. Claiming bonus from buyers and its impact on assessable value:
Regarding the third category of proforma invoices for claiming bonuses from buyers due to product performance exceeding guarantee period, the tribunal referred to previous decisions favoring appellants' stance. The tribunal highlighted precedents where bonuses were not required to be included in the assessable value of goods. Consequently, the appeal succeeded, and the impugned order was set aside.

In conclusion, the tribunal allowed the appeal after addressing the issues of differential duty demand on cost escalation, inclusion of special packing charges in assessable value, and claiming bonuses from buyers. The judgment provided detailed analysis and legal reasoning for each issue, ultimately ruling in favor of the appellants and setting aside the Commissioner's order.