2013 (1) TMI 617 - AT - Central Excise

Non inclusion of drawing and designing charges in the assessable value - manufacture of the Air Pollution Control equipment and also renders consulting Engineers services - Held that - On being pointed out by the visiting audit parties on non inclusion of value of drawing and designing charges in the total assessable value of the equipment immediately they included the said value and discharged differential duty on the revised value. Thus it can be fairly concluded that it was a bonafide mistake and there was no intention to evade Central Excise duties as they have already discharged service tax on the drawing and designing charges at the time of the sale as supported by relevant challans and also ST-3 Returns - no merit in the order passed by Commr. (Appeals) confirming the penalty u/s 11AC of CEA, 1985 - in favour of assessee.

Summary

Issues:

1. Failure to include drawing and designing charges in assessable value for excise duty calculation.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1985.

Issue 1: Failure to include drawing and designing charges in assessable value for excise duty calculation

The appellant, engaged in manufacturing Air Pollution Control equipment, had collected drawing and designing charges from customers but did not include these charges in the assessable value for excise duty calculation. The adjudicating authority confirmed the amount and imposed a penalty, which was upheld by the Ld. Commr. (Appeals). The appellant argued that they had already paid service tax on these charges when selling the drawings and designs, and it was a bonafide mistake not to include them in the assessable value of the equipment. The Tribunal found merit in the appellant's argument, noting that the differential duty was paid promptly upon audit notification. The Tribunal concluded that there was no intention to evade duties, setting aside the penalty imposed under Section 11AC of the CEA, 1985.

Issue 2: Imposition of penalty under Section 11AC of the Central Excise Act, 1985

The Ld. Commr. (Appeals) had confirmed the penalty imposed by the adjudicating authority under Section 11AC of the Central Excise Act, 1985. However, the Tribunal, after considering the arguments and evidence presented, found that the failure to include drawing and designing charges in the assessable value was a bonafide mistake by the appellant. The Tribunal noted that the appellant had already paid service tax on these charges and promptly rectified the error upon audit notification. Therefore, the Tribunal set aside the penalty imposed under Section 11AC of the CEA, 1985, and allowed the appeal on this aspect.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Section 11AC of the Central Excise Act, 1985, due to the bonafide nature of the mistake in not including drawing and designing charges in the assessable value for excise duty calculation.