2017 (7) TMI 889 - AT - Central Excise

Valuation - die modification charges - case of Revenue is that the die modification charges has also to be amortised in the value of the motor vehicle parts manufactured by the appellants in same manner as the cost of dies is amortised - Held that - the amortisation cost of die/tools/ moulds has to be included in the assessable value of the excisable goods manufactured out of such tools/die/mould supplied free of cost by the customer even though it does not make any difference whether the appellants have carried out the modification. Even if the modification is carried out by someone else, the value of modification will enhance the value of the tools/dies. When such modified tools/dies used by the manufacturer the said enhanced value shall be considered for taking the cost of the tools/die for purpose of amortisation. Therefore whether it is the original cost of the die or enhanced cost due to addition of modification charges it is one and the same and the cost of the die should be taken as the original cost of the die plus modification charges. That is the total cost of the die which is to be amortised. Accordingly, the amortisation cost of modification charges of the dies has to be included in the assessable value of the goods manufactured with the help of such die/tools. Hence the amortisation of modification charges of die is required to be included in the assessable value. Extended period of limitation - penalty - Held that - there was no means for ascertaining that the appellants have collected die modification charges in respect of those dies/tools which are used for manufacture of excisable goods of the appellants. In this fact there is a clear suppression of fact on the part of the appellants. Therefore the extended period was legally and correctly invoked by the adjudicating authority. For the same reason the penalty imposed under Section 11AC is also sustainable. Appeal dismissed - decided against appelalnt.

Summary

Issues:
1. Whether the modification charges for dies/tools received free of cost from the customer should be included in the assessable value of excisable goods manufactured.
2. Whether the demand is time-barred due to lack of suppression of facts.
3. Whether the case is of revenue neutrality due to the duty paid by the appellants and its impact on the customer's cenvat credit eligibility.

Issue 1: Modification Charges Inclusion in Assessable Value
The appellants received modification charges for dies/tools from their customer, used in manufacturing motor vehicle parts. The department argued that these charges should be amortized in the value of manufactured parts similar to the cost of dies. The Ld. Counsel contended that the modification activity is separate, already taxed, and not related to manufacturing. Citing relevant judgments, the appellants argued against inclusion. However, Rule 6 of Central Excise Valuation Rules 2000 mandates inclusion of die/tool costs in assessable value, whether original or modified. The Tribunal held that modification charges must be included in the assessable value, as they enhance the value of tools/dies used in manufacturing.

Issue 2: Time-Barred Demand
The appellants claimed the demand was time-barred as there was no suppression of facts, citing regular audits and proper accounting. However, the department argued that the extended period was rightly invoked due to non-disclosure of modification charges collection. The Tribunal found a clear suppression of fact as the balance sheet did not specify the charges' nature, just as service sales. Consequently, the extended period invocation was justified, and penalty under Section 11AC was upheld.

Issue 3: Revenue Neutrality
The appellants argued for revenue neutrality, claiming the customer received cenvat credit, making the demand redundant. However, the department refuted this, citing lack of evidence on duty payment by the customer and the extended period invocation. The Tribunal agreed, stating that as the demand was valid due to suppression of facts, cenvat credit couldn't be allowed to the customer, failing the revenue neutrality test.

In conclusion, the Tribunal upheld the impugned order, dismissing the appeal based on the inclusion of modification charges in the assessable value, the time-barred nature of the demand due to suppression of facts, and the lack of revenue neutrality evidence.