2021 (3) TMI 1407 - AT - Central Excise

Valuation - inclusion of Royalty Charges paid by the appellant to the foreign company towards the technical know-how, in the transaction value of the final product which is manufactured by the appellant - requirement to be added over and above the transaction value at which the final product is sold by the appellant to unrelated buyers or not - HELD THAT - There is no difference in the facts and law point involved in the case wherein this Tribunal in FIRMENICH AROMATICS INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, DAMAN 2019 (11) TMI 9 - CESTAT AHMEDABAD has passed and in the present case the only issue is that whether the Royalty Charges paid by the appellant towards the technical know-how should be added over and above the transaction value at which the goods were sold to unrelated buyers. It is found that the goods are sold to unrelated buyer where the valuation is governed by Section 4 of Central Excise Act, 1944 i.e. transaction value on which duty needs to be discharged. In case of transaction value under Section 4 there is no need to verify that which expenses are included and which are not included therefore, the appellant have discharged the duty on the correct transaction value. In view of the order of this Tribunal the issue is no more res integra and following said order the demand in the present is not sustainable - appeal allowed.

Summary

Issues:
Whether royalty charges paid by the appellant to a foreign company for technical know-how should be included in the transaction value of the final product.

Analysis:
The issue in this case revolves around the inclusion of royalty charges paid by the appellant to a foreign company for technical know-how in the transaction value of the final product. The appellant argues that a previous Tribunal order in their favor supports their position, citing that the same issue was considered in their earlier case where the appeal was allowed. The appellant's representatives, Chartered Accountants, emphasize the similarity of facts and legal points in the present case to the previous one, seeking a similar outcome. On the other hand, the Revenue representatives contend that the appellant has not submitted a Chartered Accountant certificate in the current case, unlike in the previous instance where such documentation was provided. The Revenue asserts that due to this lack of evidence, the previous Tribunal order cannot be applied to the current situation.

Upon hearing both sides and evaluating the submissions, the Tribunal finds that the key question is whether the royalty charges should be added to the transaction value of the goods sold to unrelated buyers. The Tribunal notes that the valuation of goods sold to unrelated buyers is governed by Section 4 of the Central Excise Act, 1944, which mandates duty to be discharged on the transaction value. In this context, the Tribunal emphasizes that under Section 4, there is no requirement to ascertain which expenses are included in the transaction value. The Tribunal highlights that the appellant has discharged duty based on the correct transaction value and refers to a previous order where a similar issue was extensively discussed and resolved.

The Tribunal's detailed analysis delves into the distinction between captive consumption and home consumption, emphasizing that the guidelines related to captive consumption are not applicable in the present case. The Tribunal reiterates that the appellant has consistently maintained that the royalty charges are included as Sales and Distribution Overheads, which are integral to the overall value of the excisable goods. Referring to amended valuation provisions from 2000 onwards, the Tribunal underscores that duty is chargeable based on the actual transaction value of the goods sold, encompassing overhead charges, manufacturing costs, and selling expenses. The Tribunal highlights that the inclusion of royalty charges in the transaction value is evident from the Chartered Accountant's certificate provided by the appellant, confirming that the royalty charges paid to the foreign company are part of the overall transaction value.

Based on the precedent set by a previous Tribunal order, the Tribunal concludes that the issue at hand is no longer open to debate. Consequently, the Tribunal sets aside the impugned order and allows the appeal in favor of the appellant, emphasizing the non-sustainability of the demand in the present case.