2005 (7) TMI 11 - AT - Central Excise

Valuation - Cost of development maintenance of design & art work - of gravure cylinders collected through debit notes - cost sheet and cost certificate do not show that such cost was amortized

Summary

Issues Involved:

1. Inclusion of charges for "Development and Maintenance of Design and Artwork" in the assessable value of the finished product.
2. Consideration of cost sheets and cost accountant certificates for amortization.
3. Allegation of suppression of facts and imposition of penalty.

Detailed Analysis:

1. Inclusion of Charges for "Development and Maintenance of Design and Artwork" in the Assessable Value:

The primary issue in this appeal is whether the amounts recovered through debit notes for "Development and Maintenance of Design and Artwork" should be included in the assessable value of the finished product, i.e., flexible packaging laminates. The Tribunal had previously directed the Commissioner to reassess this issue, considering the cost sheets provided by the appellant. The Commissioner concluded that the charges recovered separately were not included in the amortized cost of the cylinders, as evidenced by the separate invoices and debit notes issued for these charges. The rationale was that if these costs were included in the price, there would be no need for separate recovery. This conclusion was based on the observation that the cost sheets and certificates from cost accountants did not provide clear evidence that these charges were included in the amortized cost.

2. Consideration of Cost Sheets and Cost Accountant Certificates for Amortization:

The appellant argued that the cost of the cylinders, including processing charges and excise duty, was amortized, and thus, the amounts recovered separately should not be added to the value of the cylinders. They contended that the Commissioner failed to consider the cost sheets certified by Chartered Accountants, which indicated that the cost of the cylinder, including processing charges, was amortized. However, the Commissioner found these cost sheets vague and insufficient to establish that the service charges were included in the amortized cost. The Tribunal upheld the Commissioner's finding, noting that the cost sheets did not mention the charges recovered by debit notes for "Development and Maintenance of Design and Artwork."

3. Allegation of Suppression of Facts and Imposition of Penalty:

The appellant argued that there could be no suppression since the facts were already known to the department, as evidenced by an earlier show cause notice dated 1-2-1994. However, the Commissioner found that the appellant had suppressed the recovery of additional amounts in the form of service charges, thereby evading duty. The Tribunal agreed with this finding, noting that the appellant had not disclosed these facts in the relevant assessment documents during the period in question. Consequently, the imposition of a penalty of Rs. 1 crore under Rule 173Q of the Central Excise Rules, 1944, was deemed justified and was upheld.

Conclusion:

The Tribunal upheld the Commissioner's order confirming the demand of duty of Rs. 2,20,11,957/- and the imposition of a penalty of Rs. 1 crore. The appeal was dismissed, and the order was pronounced in court on 15-7-2005.