1997 (3) TMI 311 - AT - Central Excise

Summary

Issues:
Interpretation of duty payment for cost of master dies used in manufacturing excisable goods.

Analysis:
The appeal was filed by the Revenue against the order of the C.C.E. (A) regarding the amortization of the cost of master dies used in manufacturing excisable goods. The main issue was whether the charges for making the master die should be accounted for immediately upon clearance of the forgings or spread over a period based on their usage in manufacturing goods.

The Revenue argued that the master die is initially used to create subsidiary dies, which are then used in the manufacturing process of forgings over time. They contended that it might not be feasible to spread the cost over a specific period due to uncertainties regarding the number of forgings that can be produced using the subsidiary dies.

On the other hand, the respondents' counsel cited a previous Tribunal decision that supported the amortization of tool development costs. They argued that the lower authority's decision was in line with the law and should not be interfered with.

After considering both sides' arguments, the Tribunal noted that the expenses for preparing master dies are directly linked to the manufactured goods. The Tribunal emphasized that collecting duty as a one-time levy for the entire cost of the master die would not be legally or equitably sound. Each die has a lifespan and can produce a certain number of goods, which may not always meet standards or be sold continuously.

The Tribunal held that duty should be calculated on a pro rata basis, considering the normal lifespan of the master die and the quantity of goods it can produce. It directed the authorities to collaborate with the assessee to determine the cost attributable to the forgings and assess the goods accordingly. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the C.C.E. (A)'s order.

In conclusion, the judgment clarified the method of calculating duty payment for the cost of master dies used in manufacturing excisable goods, emphasizing the need for a pro rata approach based on the die's lifespan and production capacity.