1997 (7) TMI 486 - AT - Central Excise

Summary

Issues:
Assessable value of diamond drilling bits using salvaged diamonds, inclusion of extraction charges in assessable value.

Analysis:
The case involved the manufacturing of diamond drilling bits using new industrial diamonds and salvaged diamonds from old bits. The appellants collected extraction charges for the salvaged diamonds but did not pay duty on these charges. The dispute arose when the Superintendent of Central Excise raised demands for duty on the extraction charges, which the appellants contested, claiming the cost of extraction was already included in the agreed value of salvaged diamonds at Rs. 17 per carat. The appellants argued that the rebate given to customers for salvaged diamonds also covered the extraction costs. However, the JDR contended that the cost of extraction was a pre-manufacturing cost that should be part of the assessable value of the goods. The Tribunal had to determine whether the extraction charges should be included in the assessable value of the diamond drilling bits.

The appellants reiterated that the price of salvaged diamonds included the cost of extraction, as determined by the Assistant Collector's order. They argued that since the agreed value of salvaged diamonds was Rs. 17 per carat, no additional duty should be levied on the extraction charges collected from customers. On the other hand, the JDR pointed out that the valuation of Rs. 17 per carat did not include extraction costs and that the extraction charges were part of the manufacturing cost of the diamond drilling bits. The JDR emphasized that including extraction charges in the assessable value was consistent with established principles of valuation.

After considering the arguments, the Tribunal agreed with the JDR's position. They noted that while the agreed cost of salvaged diamonds was Rs. 17 per carat, the extraction charges collected by the appellants were a pre-manufacturing cost. As per the principle that manufacturing cost and profit should be part of the assessable value, the extraction charges were rightly included. Therefore, the Tribunal dismissed the appeal, upholding the duty demands on the extraction charges. The decision was based on the understanding that the extraction charges were an essential part of the manufacturing process and should be considered in determining the assessable value of the goods.