2007 (1) TMI 26 - AT - Central Excise

Valuation(Central Excise) Alleged that appellant made short payment of duty and accordingly made demand for differential duty and penalty under the impugned order After considering all the detail authority allow the appeal with consequential relief

Summary

Issues:
Dispute over assessable value for scooters manufactured and sold by the appellant leading to a demand for differential duty and penalty.

Analysis:
1. The Commissioner found that certain items needed to be included in the assessable value of scooters, resulting in non-payment of duty of about Rs.30 lakhs. The appellant contested this, citing various judgments, including those of the Hon'ble Supreme Court, to support their position. The Tribunal examined each item in detail, such as excess recovery of insurance and freight, forwarding charges, F.S.E. salary, monsoon packing, oil supply, shared advertising, and retention charges.

2. Regarding excess recovery of insurance and freight, the Tribunal agreed with the appellant, stating that recoveries and expenses under these headings do not impact the valuation of manufactured goods. The Tribunal referenced Supreme Court judgments to support this conclusion.

3. For forwarding charges, the Tribunal noted that costs beyond the factory gate should not be included in the assessable value. Since these charges were related to freight forwarding, they were excluded from the valuation.

4. Concerning F.S.E. salary, the Tribunal accepted the appellant's explanation that the cost of service engineers employed by dealers should not be part of the manufacturing cost or assessable value, even if subsidized by the manufacturer.

5. The Tribunal agreed with the appellant on the issue of monsoon packing, stating that additional supplies like plastic material for protecting scooters from rain should not be considered as part of the assessable value.

6. In the case of oil supply, the Tribunal ruled in favor of the appellant, noting that costs incurred after the clearance of goods from the factory, such as oil supplied during servicing, should not be included in the assessable value.

7. Shared advertising costs were also excluded from the assessable value, as the manufacturer's share of local advertisement costs should not be added to the sale price of scooters for assessment purposes.

8. The Tribunal found that the cost of booking forms and retention charges should not be included in the assessable value, as they were separate from the sale consideration of the scooters and not linked to the ex-factory sale price.

9. Ultimately, the Tribunal concluded that there was no justification for adding any of the disputed items to the assessable value. As there was no short-levy of duty, the imposition of a penalty was deemed unwarranted. The impugned order was set aside, and the appeal was allowed in favor of the appellant.