2015 (10) TMI 848 - AT - Central Excise

Levy fo penalty - differential duty paid was before issuance of SCN - Valuation - Non inclusion of amount received through debit notes - Held that - The entire amount of duty demand relates to designing of dies and tools charges on which the appellants have paid the differential duty for the year 1998-2001 before the issue of first SCN. We do not find any evidence and moreover it is clearly certified by the chartered engineer in his affidavit dated 06.12.2002 confirmed the number of components that could be manufactured from the moulds and dies. We hold that the respondents are liable for payment of differential duty of ₹ 1,24,509/- on the components on the amortized value for the year April 95 to June 1998. Since the respondents already paid the differential amount, the same is liable for appropriation. - Decided partly in favour of assessee.

Issues Involved:

1. Acceptance of incorrect statements by the counsel.
2. Valuation of goods under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
3. Inclusion of design, drawing, and development charges in the assessable value.
4. Validity of the Chartered Engineer's certificate.
5. Demand of differential duty and imposition of penalty.

Issue-wise Detailed Analysis:

1. Acceptance of Incorrect Statements by the Counsel:
The Tribunal initially dismissed the Revenue's appeal based on the counsel's statement that the actual amortized cost had been included in the value of the components. The High Court found that the Tribunal's findings were based on conjectures and surmises, as there was no material evidence supporting the counsel's statement. The Tribunal's order was thus not in consonance with the proceedings or material on record, leading to a remand for fresh consideration.

2. Valuation of Goods under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The primary issue was whether the value as per Rule 6 should be considered for the valuation of the impugned goods. The Tribunal noted that the amounts received by the respondent for design, drawing, and development charges were not included in the assessable value, which should have been done as these charges were directly relevant to the manufacture and supply of goods.

3. Inclusion of Design, Drawing, and Development Charges in the Assessable Value:
The Revenue argued that the amounts realized through debit notes for design, drawing, and development charges should form part of the manufacturing cost and profit, thus influencing the contracted price. The Tribunal observed that the original demand was based on the exclusion of these charges from the cost of components, which should have been included as per the Central Excise Valuation Rules.

4. Validity of the Chartered Engineer's Certificate:
The Adjudicating Authority initially rejected the Chartered Engineer's certificate due to discrepancies and its undated nature. However, the Commissioner (Appeals) held that the certificate should not be entirely rejected despite discrepancies. The Tribunal, upon remand, found that the Chartered Engineer's affidavit confirmed the original certificate and the number of components manufacturable from the moulds and dies, thus validating the certificate.

5. Demand of Differential Duty and Imposition of Penalty:
The show cause notice demanded a differential duty of Rs. 9,56,666.40, proposing penalties under Section 11AC and Rule 173Q, and interest under Section 11AB. The Tribunal found that the respondent had already paid the differential duty of Rs. 1,24,509/- for the period April 1995 to June 1998 before the issuance of the show cause notice. Consequently, the Tribunal held the respondents liable for the differential duty but waived the penalty since the duty was already paid. The Order in Appeal was set aside to the extent of dropping the demand of Rs. 1,24,509/-, and the Revenue's appeal was partly allowed.

Conclusion:
The Tribunal, upon fresh consideration, validated the inclusion of design, drawing, and development charges in the assessable value and confirmed the payment of differential duty by the respondent. The penalty was waived due to pre-emptive payment of the differential duty, leading to a partial allowance of the Revenue's appeal.

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