2002 (1) TMI 117 - AT - Central Excise

Summary

Issues:
Determining whether the amount received by the appellants towards charges for drawing designs, tooling, jigs, and fixtures could be loaded onto the value of the machines manufactured and delivered subsequently.

Analysis:

1. The Commissioner found that the agreement between the parties was not just for design and drawing but encompassed a total contract for design, drawing, manufacture of prototype, supply of machines, and payment of excise duty. The contract could not be read in isolation, and the amount received had a nexus with the machines supplied. The Commissioner confirmed the demand of duty and imposed a penalty based on the terms of the agreement dated 10-5-91.

2. The Tribunal observed that drawing and designing charges, including tooling, jigs, fixtures, etc., owned by the buyer and later supplied to the manufacturer, should be added to the assessable value of the machines. However, it was crucial to establish a nexus between the considerations and the negotiated price of the goods under clearance. The Tribunal emphasized the need to amortize the money value of such considerations and load it onto each clearance separately.

3. The Tribunal noted that the subsequent written orders for the supply of machines were not relied upon during the original proceedings. Each clearance was considered an assessment based on separate contracts, and the contract price would typically be the value for assessable goods. The Commissioner's failure to determine the money value of the additional consideration gatepass-wise and not following the Central Excise Valuation Rules led to the set aside of the order.

4. There were no specific allegations in the show cause notice regarding incorrect agreements for the supply of machines. The Tribunal found the reasons given for invoking certain provisions inadequate and vague. The charges imposed under Section 11A(1) and Rule 173Q of the Central Excise Rules were deemed unjustified due to the lack of substantial evidence.

5. Based on the detailed analysis and findings, the Tribunal set aside the Commissioner's order and allowed the appeal, emphasizing the importance of establishing a clear nexus between the additional considerations and the value of the goods supplied in each clearance.