2008 (12) TMI 129 - AT - Central Excise

Cost of design and drawings supplied by manufacturer to component vendors - Department s case is that the cost of such drawings and designs involved in the manufacture of the said components, should be included in the assessable value of the components manufactured by the vendors in view of Explanation 1 to the said Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, department s claim accepted however, practice of supplying such drawings and taking credit of duty paid on components accepted by department for long time, duty short paid is not due to suppression, so larger period not invocable

Summary

Issues:
- Inclusion of cost of drawings and designs in the assessable value of components manufactured by vendors.
- Application of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
- Interpretation of Explanation 1 to Rule 6 regarding the value of drawings and designs supplied by the buyer.
- Consideration of earlier Tribunal decisions on the inclusion of drawing costs in assessable value.
- Assessment of whether the cost of drawings and designs should be added to the value of excisable goods.
- Determination of the period of limitation for demanding additional duty and interest.

Analysis:
The judgment by the Appellate Tribunal CESTAT Kolkata involved 85 Appeals by the Department and 29 Cross-Objections by the Respondents regarding the inclusion of the cost of drawings and designs in the assessable value of components manufactured by vendors for M/s. Tata Motors. The issue revolved around whether the cost of drawings supplied by the buyer should be added to the value of excisable goods, as per Rule 6 of the Central Excise Valuation Rules. The Department argued that the cost of drawings should be included based on the provisions of Rule 6, Explanation 1, which specifies the inclusion of the value of drawings and designs supplied free of cost or at reduced cost by the buyer to the manufacturer.

The Tribunal considered an earlier decision regarding the inclusion of drawing costs in assessable value and noted that the law under the new Rules required such costs to be included. The Respondents contended that the drawings supplied were mere dimensions with no value, but the Tribunal disagreed, finding technical details representing the design of components in the drawings. The Tribunal also addressed the issue of amortization of expenses related to drawings and designs, ultimately relying on the figure provided by M/s. Tata Motors for the cost addition.

Regarding the period of limitation for demanding additional duty and interest, the Tribunal held that there was no suppression or misstatement by the assessees or the Departmental Authorities. As a result, the demand for the inclusion of drawing costs in the assessable value was limited to the normal period of limitation. The Tribunal set aside penalties imposed on the Respondents, allowing them to take credit for the additional duty paid. The matter was remanded to the Original Authority for re-determination of the duty and interest for the normal period, with instructions for a reasonable opportunity of hearing to be provided to the Respondents.

In conclusion, the Tribunal allowed the Department's Appeals and disposed of the Cross-Objections by the Respondents, emphasizing adherence to the legal provisions and principles governing the inclusion of drawing costs in the assessable value of excisable goods.