2013 (12) TMI 1288 - AT - Central Excise

Undervaluation of goods Held that - From the debit notes, it is evident that the charge of undervaluation is in respect of the AC Compressor which the appellant has manufactured and supplied - it is the appellant who has charged for the drawings and designs of the dies and the purpose for which the same is charged and the goods manufactured using these drawings and designs are very well known to the appellant thus, it cannot be pleaded that the appellant did not know in respect of which item, the undervaluation has been alleged and the differential duty is being demanded Includability of the value of charges of drawings and design of dies etc. for the purpose of excise duty demand has been decided by the SC in Moriroku UT India (P) Ltd. Vs. State of UP 2008 (3) TMI 513 - SUPREME COURT OF INDIA - amortized cost should be included in the price of auto components supplied for the purpose of levy of excise duty. The cost of the product sold would include not only the cost of raw materials, labour charges and other costs but also the various cost incurred in the manufacture such as cost of capital goods like machinery, tools, dies, etc. - if the appellant has not included the amortized cost of dies or the cost of drawings and designs developed for the manufacture of excisable goods, the consideration received would be includable in the assessable value of the goods manufactured using these drawings and designs. Demand of Service Tax - Consulting Engineers Service Extended period of limitation - Held that - The appellant is a manufacturer and not a Consulting Engineer - Only w.e.f. 1.5.2006, the law was amended to include any body corporate rendering such services liable to pay Service Tax. Since in the present case, the period involved is prior to 1.5.2006, the Service Tax demand on the appellant is not sustainable in law - The fact of developing designs/drawings etc. and collecting charges separately were not disclosed by the appellant to the department hence, the charge of suppression of facts and consequent invocation of extended period of time to demand excise duty sustainable in law Decided partly in favour of Assessee.

Summary

Issues:
1. Excise duty demand on charges for drawings and designs.
2. Service Tax demand on Consulting Engineers Service.
3. Vagueness in show-cause notice.
4. Inclusion of charges in assessable value for excise duty.
5. Liability of excise duty on captively consumed dies.
6. Liability of Service Tax on a manufacturer.
7. Suppression of facts and extended period for excise duty demand.

Excise Duty Demand on Charges for Drawings and Designs:
The appellant, a manufacturer of motor vehicle parts, faced a show-cause notice proposing excise duty demand for not including charges received from customers for drawings, designs, and development of dies in the value of goods manufactured. The tribunal upheld the demand citing the Supreme Court decision that amortized costs of tools, dies, and drawings must be included in the assessable value for excise duty purposes. The tribunal rejected the appellant's argument of captively consuming dies and not incurring excise duty liability, emphasizing that all costs incurred in manufacturing, including capital goods like dies, contribute to the excise duty liability.

Service Tax Demand on Consulting Engineers Service:
The tribunal ruled that the Service Tax demand on the appellant, a manufacturer, under the category of Consulting Engineers Service for the period before 1.5.2006 was not sustainable in law. The law at that time placed the liability on Consulting Engineering firms, not manufacturers. The amendment w.e.f. 1.5.2006 extended the liability to "body corporates," but for the period in question, the demand on the appellant was deemed invalid.

Vagueness in Show-Cause Notice:
The appellant argued vagueness in the show-cause notice regarding the goods to which the demands pertained. However, the tribunal found the notice clear in specifying the charges for drawings and designs on specific items manufactured by the appellant, dismissing the appellant's claim of ambiguity.

Inclusion of Charges in Assessable Value for Excise Duty:
The tribunal emphasized that charges for drawings and designs must be included in the assessable value for excise duty purposes, as per the Excise Valuation rules and the Supreme Court decision cited. The appellant's failure to disclose the development of designs and drawings led to the sustained excise duty demand.

Liability of Excise Duty on Captively Consumed Dies:
The tribunal rejected the appellant's argument of no excise duty liability on captively consumed dies, reiterating that all costs related to manufacturing, including dies and designs, contribute to the excise duty liability on the goods manufactured.

Liability of Service Tax on a Manufacturer:
The tribunal clarified that, as a manufacturer, the appellant was not liable for Service Tax under the Consulting Engineers Service category for the period before 1.5.2006, as the law then did not extend the liability to manufacturers.

Suppression of Facts and Extended Period for Excise Duty Demand:
The tribunal upheld the charge of suppression of facts by the appellant regarding the development of designs and drawings, justifying the invocation of the extended period for demanding excise duty. The demand for excise duty, interest, and penalty under section 11AC was upheld, while the Service Tax demand was set aside.

In conclusion, the tribunal partly allowed the appeal, upholding the excise duty demand with interest and penalty but setting aside the Service Tax demand with interest and penalty.