2015 (12) TMI 1312 - AT - Central Excise

Duty demand - Shortage of goods - Valuation - Inclusion of royalty amount - Held that - Appeal filed by the Revenue is hit by Doctrine of Merger . Vide appellate order by the Commissioner (Appeals), it was held that royalty paid is deductible from the assessable value and the same will not form part of the assessable value if there is evidence of payment to the principal. Against this order, the Revenue did not prefer appeal. According to the direction in the remand order of learned Commissioner (Appeals), the adjudicating authority examined the matter and found that royalty have been duly paid and accordingly allowed deductions in conformity with direction in the appellate order. Thus, the issue attained finality. Subsequent appeal by the Revenue before the Commissioner (Appeals) and before this Tribunal is hit by doctrine of merger. - Decided against Revenue.

Summary

Issues:
1. Confiscation of excess stock and duty on shortages
2. Recovery of royalty amount and freight charges
3. Doctrine of Merger in appeal by Revenue

Confiscation of Excess Stock and Duty on Shortages:
The case involves an appeal by the Revenue against an Order-in-Appeal passed by the Commissioner of Central Excise & Service Tax concerning excess stock and shortages found during an inspection. The excess goods of 1579 kgs and shortages in stock were detected, leading to the issuance of a show-cause notice. The appellant contested the notice, and the matter was adjudicated, resulting in the confiscation of excess stock, confirmation of duty on shortages, and imposition of penalties under relevant sections. The Commissioner (Appeals) upheld the confiscation and duty, leading to the Revenue's appeal before the Tribunal.

Recovery of Royalty Amount and Freight Charges:
The investigation revealed that the appellant collected an additional amount of Rs. 3 per kg from buyers, which the Revenue argued should be part of the assessable value. The appellant's representative admitted to the collection and explained it as royalty charges for using a brand name. The show-cause notice included the recovery of various amounts, including duty on royalty and freight collected. The adjudication confirmed the duty amounts and imposed penalties. The Commissioner (Appeals) upheld the decision, leading to the appeal before the Tribunal.

Doctrine of Merger in Appeal by Revenue:
The Tribunal observed that the Revenue's appeal was hit by the Doctrine of Merger. The appellate order by the Commissioner (Appeals) had already determined that royalty paid is deductible from the assessable value if evidence of payment to the principal exists. As the adjudicating authority found evidence of royalty payment and allowed deductions as per the appellate order, the issue was considered finalized. Therefore, subsequent appeals by the Revenue were dismissed based on the Doctrine of Merger, as the matter had attained finality. The Tribunal upheld the findings of the adjudicating authority and dismissed the Revenue's appeal.

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