2024 (6) TMI 1175 - AT - Central Excise

Valuation - inclusion of cost of tools from the buyer-customers by raising excise invoices, in the assessable value - benefit of N/N. 67/95 CE dated 16.03.1995 - Double Taxation or not - extended period of limitation - suppression of facts or not. Inclusion of cost of tools from the buyer-customers by raising excise invoices, in the assessable value - HELD THAT - The issue as to whether the cost of tools supplied by the buyer free of charge back to the appellant, should be included as an amortised cost, when the said tools are used in the appellants factory for manufacture of components for the said buyers, in terms of Rule 6 of CVR 2000 or not, has been examined by this Tribunal in M/s Best Cast IT Ltd 2023 (6) TMI 99 - CESTAT CHENNAI after considering the judgements of COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I VERSUS M/S MEGA RUBBER TECHNOLOGIES PVT. LTD. 2016 (1) TMI 157 - CESTAT MUMBAI and the Larger Bench decision in Mutual Industries Ltd Vs Commissioner of Central Excise, Mumbai 2000 (3) TMI 74 - CEGAT, COURT NO. I, NEW DELHI , where it was held that ' had the mould not been supplied by the customer, appellant could not have agreed to the price of the finished goods at the price as is evidenced by the contract entered into between them. So, the price of the finished goods fixed in the contract between the parties can safely be taken as not the sole consideration for the sale of the finished product.' The fact whether the tools were manufactured in the appellants factory or was outsourced by the appellant from another company would not change the legal position as per CVR 2000 so long as they were paid for by the buyer-customer - The tools manufactured and used for production of components at the cost of the buyer and against purchase orders, needs to be included in the cost of production and amortized for payment of duty on the final products manufactured by the appellant using such tools. Double taxation - HELD THAT - Double taxation with reference to central excise duties on goods means levying central excise taxes twice on the very same excisable product, which is not the case here - Had they purchased the tools from the market its price would have automatically entered the price of the final product sold by them. Hence the question of double taxation does not arise. Benefit of N/N. 67/95 CE dated 16.03.1995 - HELD THAT - A Co-ordinate Bench of this Tribunal in Ashok Iron Works 2004 (2) TMI 482 - CESTAT, BANGALORE has held at para 6 that the benefit of Notification No.67/95 CE was available to jigs, fixtures, patterns and tooling irrespective of the ownership of these goods - The excise duty element would hence not form a part of the amortised value of the tools and it needs to be re-worked out suitably. However, it is noted that the eligibility for exemption from payment of duty for the tools does not detract from amortising the cost of the tool charged to the buyer, less the duty element. Extended period of limitation - HELD THAT - The requirement of law is that mere failure or negligence in adopting the correct value and making the correct payment of duty cannot be considered as suppression of fact with intention to evade payment of duty, especially when the issue was complex. Something more is required to show that there was a positive intention to evade payment of duty - there are no grounds to invoke the extended period and the demand for the larger period must fail. The matter remanded back to the Original Authority for re-quantification of the duty demand for the normal period - appeal allowed by way of remand.

Issues Involved:
1. Inclusion of the cost of tools supplied by the buyer in the assessable value.
2. Allegation of double taxation.
3. Eligibility for exemption under Notification No. 67/95-CE.
4. Inclusion of development charges in the cost of production.
5. Invocation of the extended time limit for demand.

Issue-wise Detailed Analysis:

1. Inclusion of the Cost of Tools Supplied by the Buyer in the Assessable Value:
The Tribunal examined whether the cost of tools supplied by the buyer free of charge should be included as an amortized cost when such tools are used in the appellant's factory for manufacturing components for the buyers, in terms of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (CVR 2000). The Tribunal referred to the decision in M/s Best Cast IT Ltd and the Larger Bench decision in Mutual Industries Ltd, concluding that the cost of tools must be included in the cost of production and amortized for payment of duty on the final products. The Tribunal stated, "The tools manufactured and used for production of components at the cost of the buyer and against purchase orders, needs to be included in the cost of production and amortized for payment of duty on the final products manufactured by the appellant using such tools."

2. Allegation of Double Taxation:
The Tribunal clarified that double taxation, in this case, does not arise. It stated, "Double taxation with reference to central excise duties on goods means levying central excise taxes twice on the very same excisable product, which is not the case here." The Tribunal explained that the appellant pays excise duty first on the tools and then on the final products (gaskets) manufactured using those tools. Both are separate sets of excisable goods, thus, the question of double taxation does not arise.

3. Eligibility for Exemption Under Notification No. 67/95-CE:
The appellant argued that they are eligible for the benefit of Notification No. 67/95-CE for tools captively manufactured and used in their factory. The Tribunal concurred with the decision in Ashok Iron Works, stating, "The benefit of Notification No. 67/95-CE was available to jigs, fixtures, patterns, and tooling irrespective of the ownership of these goods." However, the Tribunal noted that the excise duty element would not form part of the amortized value of the tools and needs to be re-worked accordingly.

4. Inclusion of Development Charges in the Cost of Production:
For invoices at Sl. No. 5 and 6, the Tribunal addressed the issue of payments collected towards 'development NVH project charges.' The Tribunal found that the value of goods or services paid for by the buyer and used for the development of the buyer's tools must be amortized. It stated, "Amortizing the value of tools viz., jigs and fixtures, molds, and dies will include amortizing its total monetary value (i.e., both of the tools manufactured and services rendered to the buyer for the manufacture of the tools)."

5. Invocation of the Extended Time Limit for Demand:
The Tribunal examined whether the extended time limit could be invoked. It concluded that mere failure or negligence in adopting the correct value and making the correct payment of duty cannot be considered as suppression of fact with the intention to evade payment of duty. The Tribunal stated, "We do not find any such reason or finding in the impugned order. We hence do not find grounds to invoke the extended period and the demand for the larger period must fail."

Conclusion:
The Tribunal remanded the matter back to the Original Authority for re-quantification of the duty demand for the normal period, ensuring that the principles of natural justice are followed. The Tribunal directed the lower authority to afford a reasonable and time-bound opportunity to the appellant to state their case before issuing a speaking order. The appellant is eligible for consequential relief as per law. The appeal was disposed of accordingly.

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