2019 (10) TMI 885 - AT - Central Excise

Valuation - casting items were manufactured as per the specification of drawing supplied by the buyers of such casting items - inclusion of value of the said drawings in the assessable value - imposition of penalty - HELD THAT - The statute provides for adding the value of drawings, blue prints, technical expertise, maps and of such similar items as are used in production of the goods. Apparently and admittedly the drawings herein, for the goods manufactured/produced, are provided by the customers and the value thereof has not been included in the assessable value. Rule 6, as above, specifically includes the value thereof in the assessable value. Irrespective those drawings have been provided free of cost to the appellants, the value thereof is required to be included as per Rule 6 itself. Even in terms of Section 4, as above, the value of these drawings is something else in addition to money - Hence, the value of the impugned drawings is liable to be included in the assessable value. Imposition of penalty - HELD THAT - The appellant has taken the plea of prevalent confusion but we observe from the record that the appellant was several time asked by the department to produce the evidence about receipt of drawings free of charge and that the same never provided nor ever was declared in the ER-1 returns. Such a conduct of the appellant rather corroborate the alleged intention of the appellant to not to include the value of drawings into the assessable value so as to evade the duty - penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
- Whether the value of drawings provided by customers for manufacturing casting items should be included in the assessable value.
- Imposition of penalty on the appellant for not including the value of drawings in the assessable value.

Analysis:
1. Issue 1 - Value of Drawings in Assessable Value:
The case involved a dispute regarding the inclusion of the value of drawings provided by customers in the assessable value of casting items manufactured by the appellant. The appellant argued that there was confusion during the relevant period about including such values and that they had a bona fide belief for non-payment. However, the Tribunal referred to Section 4 of the Central Excise Act and Rule 6 of the Central Excise Valuation Rules, which clearly state that the value of drawings, technical expertise, and similar items used in production must be included in the assessable value. Despite the drawings being provided free of cost, Rule 6 mandates their inclusion. The Tribunal upheld that the value of the drawings should have been added to the assessable value, rejecting the appellant's argument based on a previous decision that was deemed inapplicable to the present case.

2. Issue 2 - Imposition of Penalty:
The appellant also contested the imposition of a penalty, citing prevalent confusion and a lack of intention to evade duty. However, the Tribunal noted that the appellant failed to provide evidence of receiving the drawings free of charge, as requested by the department. This lack of cooperation, along with the statutory requirement to include the value of such expertise in the assessable value, indicated an intention to evade duty. The Tribunal concluded that the confusion argument was not valid, as the statutory mandate was clear. Therefore, the penalty imposed on the appellant was upheld, and the appeal was rejected.

In conclusion, the Tribunal ruled that the value of drawings provided by customers should have been included in the assessable value of the manufactured goods. Additionally, the penalty imposed on the appellant for failing to include this value was upheld due to the lack of evidence provided and the statutory requirement to consider such expertise in the transaction value.