2017 (6) TMI 1068 - AT - Central Excise

Valuation - design and development charges - includibility - Held that - Since the design and development charges has no connection with the sale price of the goods to independent buyers, the same, by any stretch of imagination cannot be included in the assessable value of the welding machine - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Inclusion of design and development charges in the assessable value of welding machines under Chapter 8515.00 of the Central Excise Tariff Act, 1985.

Analysis:
The case involved the appellants, engaged in manufacturing welding machines, who obtained design and development services from their sister concern for which a show cause notice was issued alleging failure to include the charges in the assessable value of the machines. The adjudicating authority confirmed the duty demand, leading to an appeal before the Commissioner (Appeals) who upheld the decision, prompting the appellants to approach the tribunal.

The appellant's counsel argued that the design and development services were received on a principal to principal basis from their sister concern, and the payment made towards these services was already accounted for in their profit and loss account. It was emphasized that the services were not received free of cost, and the machines were sold at transaction value to independent customers without any additional charges for design and development.

The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order, asserting the correctness of including the charges in the assessable value of the welding machines.

Upon careful consideration, the tribunal observed that the appellant sold the welding machines to independent buyers at transaction value and received the design and development services from their sister concern on a payment basis, not recovered separately from the customers. The tribunal concluded that since the charges had no connection with the sale price to independent buyers, they could not be included in the assessable value of the machines. Therefore, the tribunal deemed the excise duty demanded on the inclusion of design and development charges as incorrect and illegal, setting aside the impugned order and allowing the appeal in favor of the appellants.

The judgment, pronounced on 30/05/2017 by Shri Ramesh Nair, Member (Judicial) and Shri Raju, Member (Technical), highlighted the importance of distinguishing between expenses incurred by the appellant and the assessable value of the goods sold, ultimately ruling in favor of the appellants in this dispute over the inclusion of design and development charges in the assessable value of welding machines.