2011 (3) TMI 851 - AT - Central Excise

Valuation - respondents had collected Die Research Development charges from their customers without including cost thereof in the assessable value of the final product nor disclosing the same in the monthly returns submitted to the department - Held that - respondents have been charging in relation to die research development charges from their customers by raising debit notes without disclosing the said fact to the department and without including the cost thereof in the assessable value of the final product apparently justified the order passed by the adjudicating authority and, therefore, the Commissioner (Appeals) was not justified in interfering with order, order passed by the adjudicating authority confirmed

Summary

Issues:
- Challenge to order setting aside demand of Rs. 71,721 along with interest
- Inclusion of die research & development charges in assessable value of final product
- Interpretation of relevant case laws on inclusion of development charges in assessable value

Analysis:
1. The appeal stemmed from an order by the Commissioner (Appeals) setting aside a demand of Rs. 71,721 along with interest, confirmed by the Deputy Commissioner. The respondents, engaged in manufacturing aluminum sections, were found to be collecting Die Research & Development charges from customers without disclosing them in the assessable value or monthly returns.

2. The main contention against the impugned order was that the Commissioner (Appeals) failed to consider that the respondents were indeed collecting development charges separately through debit notes, without including them in the assessable value of the final product. The General Manager's statement confirmed this practice.

3. The Tribunal referred to precedents like Mutual Industries Ltd. and United Systems Engineers Pvt. Ltd. to establish that costs related to research and development should be included in the assessable value of the final product. The decision in Ashok Iron Works Ltd. was also discussed, highlighting the importance of establishing a direct link between development charges and specific excisable goods.

4. Ultimately, the Tribunal upheld the order passed by the adjudicating authority, emphasizing that the respondents had been charging development charges separately without disclosing them to the department or including them in the assessable value. The Commissioner (Appeals) was deemed unjustified in setting aside the original order, leading to the success of the appeal and confirmation of the adjudicating authority's decision.

In conclusion, the judgment focused on the proper inclusion of development charges in the assessable value of final products, emphasizing the need for transparency and adherence to excise laws. The decision was supported by relevant case laws and established practices in similar cases, ensuring consistency and clarity in tax assessments related to research and development expenses.