2019 (11) TMI 9 - AT - Central Excise

Valuation - inclusion of royalty charges in the assessable value - Royalty Charges for technical knowhow was paid during the period 2012-13 to 2014-15 - captive consumption - HELD THAT - As per facts of the present case, the consumption of excisable goods is not for captive consumption but for home consumption and on principal to principal sale basis. Therefore, the guidelines relied upon by the department has no relevance in the present case. Now, coming to the facts that whether the transaction value at which goods were sold and excise duty was paid, included the Royalty Charges paid by the appellant to the foreign collaborators - The appellant, time and again maintained that the Royalty Charges is clearly included as Sales and Distribution Overheads. Therefore, there is no doubt that the Royalty Charges is included in the overall value of the excisable goods. After the amended valuation provisions, from 2000 onwards, the duty is chargeable on the actual transaction value at which the goods are sold and therefore, any overhead charges cost of manufacture or selling expenses, everything stand included in the transaction value of the finished goods. Therefore, only expenses on account of Royalty Charges not shown in the cost of manufacture of the product will not make any difference as the same is admittedly stand included as Selling and Distribution expenses in the overall transaction value - It is also evident from the Chartered Accountant s that Royalty Charges paid to foreign company stand included in the transaction value. The SCN also admit that the Royalty Charges is shown as Sales Distribution overhead in the appellant s books of account. This itself proves that the Royalty Charges is indeed included in the transaction value. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of Royalty Charges in assessable value for excise duty calculation.

Analysis:
The case involves a dispute regarding the inclusion of Royalty Charges in the assessable value of excisable goods for the calculation of Central Excise duty. The appellant, a manufacturer of excisable goods, had paid Royalty Charges for technical know-how to a foreign collaborator during a specific period. The audit revealed that these Royalty Charges were not included in the assessable value of the finished goods, leading to a short payment of Central Excise duty. Consequently, a show cause notice was issued, and the Adjudicating Authority confirmed a demand for Central Excise duty, interest, and imposed a penalty.

The appellant contended that the Royalty Charges were indeed included in the assessable value, supported by a Chartered Accountant's certificate. They argued that the Royalty Charges were part of the Sales and Distribution Overheads and were reflected in the transaction value at which the goods were sold. The appellant relied on various legal precedents to support their position.

On the other hand, the Revenue, represented by the Superintendent, reiterated the findings of the impugned order and relied on specific judgments to support their stance that the Royalty Charges should have been included in the assessable value for excise duty calculation.

After considering the arguments from both sides, the Tribunal observed that the Royalty Charges were included in the transaction value of the goods sold by the appellant. They emphasized that post-amended valuation provisions, duty is chargeable on the actual transaction value, which encompasses all overhead charges and expenses related to the manufacturing and selling of the goods. The Tribunal noted that the Chartered Accountant's certificate confirmed the inclusion of Royalty Charges in the transaction value, as reflected in the books of accounts. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant.

In conclusion, the Tribunal's decision centered on the crucial aspect of whether the Royalty Charges were correctly included in the assessable value for excise duty calculation. By analyzing the factual and legal arguments presented by both parties, the Tribunal determined that the Royalty Charges were indeed part of the transaction value and, therefore, the demand for Central Excise duty was not justified in this case.