2015 (2) TMI 1087 - AT - Central Excise

Valuation - Determination of assessable value - Inclusion of value of drawings - Held that - Since in this case the goods being manufactured by the appellant are custom made and as per the requirements of each customer, for determining the value of the goods manufactured for a particular customer, the price of the goods supplied to other customers cannot be applied. In these circumstances, we are of the view that in the cases where the goods were manufactured by using the drawings supplied by the customers, the value of the drawings would have to be included in the assessable value of the goods. However, in this regard, the Commissioner has adopted value of the drawing as 10 per cent of the value and the goods for which he has not given any justification. On the other hand, the appellant s plea is that in the cases where the drawings and designs have been supplied by the customer, their cost is 0.1% of the value of the goods and in this regard, they rely upon the Chartered Engineer s Certificate. While cost of drawings and designs as 10% of the value of the goods adopted by the department is arbitrary, unreasonable and without any basis and same cannot be accepted, the Commissioner while rejecting the value claimed by the appellant based on the chartered engineering certificate has to give reasons for the same. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Interpretation of Central Excise Valuation Rules regarding inclusion of drawings and designs supplied by customers in assessable value.

Analysis:
The appellant, a manufacturer of engineering goods, did not charge extra for goods made as per customers' drawings. The department demanded duty of Rs. 2,60,09,115 for the period from October 2004 to July 2011, considering 10% of the value of goods as additional consideration for drawings and designs. The appeal challenges this order.

The appellant argues that goods were sold at the same price to all buyers, with no extra charge for drawings. They assert that the transaction value to independent buyers should be the assessable value. The respondent defends the order, citing a Tribunal judgment that drawings and designs' value should be included in goods' value. The appellant cites another Tribunal judgment to argue against including the cost of drawings and designs.

The Tribunal notes that goods were custom-made per customer requirements, so the value for customers who supplied drawings cannot be compared to others. It concludes that the value of drawings supplied by customers should be included in assessable value, but the 10% value adopted by the Commissioner is arbitrary. The Commissioner must justify rejecting the appellant's 0.1% value based on a chartered engineer's certificate. The order is set aside, remanding the matter for reevaluation with proper justifications for any new value adopted, emphasizing that arbitrary values like 10% cannot be used without adequate basis.