2007 (7) TMI 133 - AT - Central Excise

Amount reflected in debit notes cannot be considered abnormal expenditure so includible in assessable value Designs and drawings charges includible, as they are essential for manufacturing Dept. could not show that how the notional interest on advances influence the price so not includible

Summary

Issues:
1. Valuation of goods for captive consumption
2. Inclusion of designs and development charges in the value of goods
3. Addition of notional interest on advances
4. Assessment under Notification No. 120/75-C.E.
5. Penalty imposition

Valuation of goods for captive consumption:
The first issue in this case pertains to the valuation of goods taken for captive consumption. The Adjudicating Commissioner held that amounts in debit notes, on which Excise Duty was not paid, must be included in the invoice price to determine the value of the goods. The Tribunal rejected the argument that the amount in the debit note represented abnormal expenditure not liable to be included in the assessable value. The Tribunal noted that the remand order did not require this issue to be reopened, confirming the demand of Rs. 7,85,230.

Inclusion of designs and development charges:
The second issue concerns the inclusion of designs and development charges in the value of goods. The Tribunal found that the designs and drawings were essential for manufacturing the goods and were handed over to buyers, indicating their integral role in the goods' value. As a result, the entire value of the designs and drawings was deemed part of the assessable value, confirming the duty demand of Rs. 3,65,300.

Addition of notional interest on advances:
Regarding the addition of notional interest on advances, the Tribunal noted that the Department failed to demonstrate how prices were influenced by the advances. Citing relevant case law, the Tribunal set aside the demand of Rs. 4,97,221, emphasizing that the burden to prove that interest-free advances influenced prices lay with the Revenue, which was not discharged.

Assessment under Notification No. 120/75-C.E.:
The fourth issue involved the assessment under Notification No. 120/75-C.E., which allowed assessment based on invoice price. The Department contended that certain costs were not included in the invoice value, contravening the notification. However, referencing a Supreme Court decision, the Tribunal set aside the demand of Rs. 6,77,305.92, emphasizing that assessment on the invoice value was permissible.

Penalty imposition:
Regarding the penalty imposed, the Tribunal reduced the penalty from Rs. 2.00 lakhs to Rs. 25,000, considering the appellants' appeal and the interpretation of law involved in the case. The Tribunal partially allowed the appeal, providing relief on two issues and reducing the penalty amount.

In conclusion, the Tribunal addressed various issues related to valuation, inclusion of charges, notional interest, assessment under specific notifications, and penalty imposition, providing detailed reasoning and legal interpretations for each aspect, ultimately partially allowing the appeal and adjusting the penalty amount.