2019 (4) TMI 322 - AT - Central Excise

Valuation - inclusion of drawings and designs supplied by their customers in assessable value - Rule 6 of The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - revenue neutrality - extended period of limitation - penalty - difference of opinion - Held that - Various points of difference emerging on the issue.

Issues Involved:
1. Nature of documents supplied (designs and drawings vs. instructions).
2. Inclusion of the value of said documents in the assessable value.
3. Applicability of judicial decisions post-01.07.2000.
4. Revenue neutrality.
5. Applicability of Notification No. 214/86.
6. Consideration of credit availability to appellants’ customers.
7. Invocation of extended period of limitation.
8. Imposition of penalties.

Issue-Wise Detailed Analysis:

1. Nature of Documents Supplied:
The primary issue was whether the documents supplied by the customers were "designs and drawings" or merely "instruction sheets." The Member (Technical) concluded that these were indeed designs and drawings, as indicated by the customers' own labeling. Conversely, Member (Judicial) opined that these documents were instructional in nature, guiding the manufacturing process rather than constituting designs.

2. Inclusion of Value in Assessable Value:
The Member (Technical) held that the value of the designs and drawings supplied free of cost should be included in the assessable value as per Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Member (Judicial), however, disagreed, arguing that even if the documents were considered designs, their value should not be added to the assessable value, citing various judicial precedents.

3. Applicability of Judicial Decisions Post-01.07.2000:
Member (Technical) argued that decisions rendered under the old Section 4 of the Central Excise Act were not applicable post-01.07.2000 due to changes in the valuation rules. Member (Judicial) countered this by referencing the Supreme Court's observation that there is virtually no difference between the old and new provisions of Section 4, thus making earlier decisions still relevant.

4. Revenue Neutrality:
Member (Technical) rejected the plea of revenue neutrality, emphasizing that the transactions were on a principal-to-principal basis and involved sale and purchase of goods. Member (Judicial) maintained that the entire exercise was revenue-neutral since the duty paid by the appellants would be available as credit to their customers.

5. Applicability of Notification No. 214/86:
Member (Technical) stated that the appellants did not follow the job-work procedure under Notification No. 214/86 and thus were liable to pay duty. Member (Judicial) argued that the appellants could have opted for the duty-free job-work procedure, which would have negated the need for duty payment and the consequent dispute.

6. Consideration of Credit Availability to Customers:
Member (Technical) did not find the availability of credit to the customers relevant for determining revenue neutrality. Member (Judicial) emphasized that since the duty paid by the appellants would be available as credit to their customers, the entire situation should be considered revenue-neutral.

7. Invocation of Extended Period of Limitation:
Member (Technical) upheld the invocation of the extended period of limitation, citing misdeclaration and suppression of facts. Member (Judicial) disagreed, arguing that there was no mala fide intention or positive evidence of suppression, making the invocation of the extended period unjustified.

8. Imposition of Penalties:
Member (Technical) supported the imposition of penalties under Section 11AC, citing the Supreme Court's decisions in Dharmendra Textiles and Rajasthan Spinning and Weaving Mills. Member (Judicial) opposed the penalties, arguing that there was no deliberate intent to evade duty and the entire situation was revenue-neutral.

Conclusion:
The appeals were dismissed by Member (Technical), who upheld the demand, interest, and penalties. Member (Judicial), however, allowed the appeals, setting aside the demands and penalties. The points of difference were referred for resolution.

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