2012 (12) TMI 910 - AT - Central Excise

Waiver of predeposit - Duty demand - Suppression or facts with intent to evade payment of duty - Held that - We have gone through the terms and conditions of the contract between the appellant and one of the buyers. These terms and conditions pertaining to engineering documentation prima facie indicate that the drawings supplied by the buyer had to be used by the assessee for the manufacture of the subject goods. It is not in dispute that the specifications were developed from these drawings. Prima facie , in this scenario, at least an indirect nexus between the subject goods and the drawings/designs cannot be ruled out - we are of the prima facie view that, on applicability of Rule 6 to the transactions in question, the appellant has no case, but their challenge to the manner of value addition done by the adjudicating authority needs careful consideration. As to the plea of limitation, the appellant does not seem to have made out a convincing case - Decided against assessee.

Issues:
1. Waiver of predeposit and stay of recovery sought by the appellant in relation to Central Excise duty, Education Cess, and penalty.
2. Impugned demand based on addition of cost of drawings and designs to the transaction value of engineering parts.
3. Contest on merits and limitation grounds by the appellant.
4. Interpretation of Rule 6 of the Central Excise Valuation Rules.
5. Analysis of the terms and conditions of transactions between the appellant and buyers.
6. Justification for invoking the extended period of limitation.
7. Assessment of the value addition methodology applied by the adjudicating authority.
8. Evaluation of the plea of limitation raised by the appellant.

Analysis:

1. The appellant filed an application seeking waiver of predeposit and stay of recovery for a demand amount of Rs 1,06,48,228/- comprising Central Excise duty, Education Cess, and penalty. The demand was linked to the addition of the cost of drawings and designs to the transaction value of engineering parts supplied to various contractors during specific years. The impugned order invoked the proviso to Section 11A(1) of the Central Excise Act, alleging suppression of facts to evade duty payment.

2. The appellant contested the demands on both merit and limitation grounds. The appellant's counsel argued that the drawings or designs were not used in manufacturing, only dimensional specifications were utilized, and the value addition was based on the terms of transactions without provision for supply of drawings. Reference was made to relevant invoices and purchase orders to refute the demand. The appellant also challenged the demand on limitation, highlighting the delay in issuing the show-cause notice after the conclusion of investigations.

3. The Deputy Commissioner (AR) presented terms and conditions of transactions, particularly focusing on engineering documentation between the appellant and a buyer. The AR contended that the appellant was obligated to use drawings supplied by the buyer in manufacturing. Invoices raised between parties were cited to support the claim that 10% of the total turnover was justified for including the cost of drawings in the assessable value.

4. Rule 6 of the Central Excise Valuation Rule was scrutinized, emphasizing the inclusion of designs and drawings in the assessable value. The appellant's assertion of not using buyer-supplied drawings was countered by terms of the contract indicating the necessity of using such drawings in manufacturing. The indirect nexus between goods and drawings was acknowledged, raising doubts on the appellant's position.

5. Discrepancies in the value addition methodology were noted, with reliance on an invoice for 10% addition lacking concrete consensus between parties. The empirical nature of costing was highlighted due to the absence of independent documentary evidence supporting the percentage addition.

6. The plea of limitation by the appellant faced scrutiny as the company's functionaries provided statements during investigations. Lack of disclosure of material facts to the department during the dispute period was noted, challenging the appellant's claim of limitation. Precedents were cited to counter the appellant's limitation argument.

7. The Tribunal concluded that Rule 6 applied to the transactions, directing the appellant to predeposit a specified amount within a stipulated timeframe. While the challenge to the value addition methodology required further examination, the appellant's limitation plea was deemed unconvincing due to the lack of disclosure of material facts during the dispute period. Compliance reporting deadlines were set for the appellant and the department.

This detailed analysis covers the issues raised in the judgment comprehensively, providing a thorough understanding of the legal complexities involved.

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