1994 (11) TMI 276 - AT - Central Excise

Summary

Issues:
1. Inclusion of royalty collected by the appellant in the assessable value of anodes for excise duty calculation.
2. Time-barred demand for excise duty based on royalty collection.

Analysis:
1. The main issue in this case was whether the royalty collected by the appellant should be included in the assessable value of anodes for excise duty calculation. The appellant argued that the royalty amount collected from customers was not linked to the manufacture and sale of anodes, as the duty liability was discharged at the time of clearance based on the agreed price. However, the respondent contended that all elements of cost making up the inherent value of goods at the factory gate should be included. The Tribunal examined the license deed between the appellant and NRDC, which granted the appellant the right to use a patented invention for manufacturing anodes. The Tribunal concluded that the royalty paid had a direct nexus to the anodes manufactured by the appellant, as per the terms of the license deed. Therefore, the royalty amount was deemed to be part of the cost of the anodes and should be included in the assessable value.

2. The second issue revolved around the time-barred demand for excise duty based on royalty collection. The appellant argued that the demand was time-barred as the Department had prior knowledge of the royalty collection, and there was no intentional evasion of duty. The appellant had disclosed details of royalty amounts in various communications with the Department. The Tribunal noted that the Department's scrutiny of records and correspondence indicated that the appellant had not knowingly withheld information to evade duty. Citing the Supreme Court decision in a similar case, the Tribunal held that the demand could not be extended beyond six months under Section 11A of the Central Excises & Salt Act, 1944. Therefore, the demand for excise duty was limited to six months, and the appeal was disposed of in favor of the appellant on this issue.

This judgment clarifies the inclusion of royalty in the assessable value of goods for excise duty calculation and sets a precedent regarding time-barred demands based on disclosure of information to the Department.