2001 (3) TMI 539 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of Research and Development charges and Technological know-how fees in the assessable value of a prototype radio.

Analysis:
The appeal in question revolves around the inclusion of Research and Development charges and Technological know-how fees in the assessable value of a prototype radio supplied by M/s. United Systems Engineers Pvt. Ltd. to Rural Communication Division, Telecom Research Centre, Bangalore. The appellants argue that the costs incurred for Research and Development should not be considered part of the assessable value of the prototype, as they were developed solely to demonstrate the technology and not for mass production purposes. They contend that these costs should be distinguished from engineering drawing and design charges. However, the Commissioner and the learned SDR argue that all expenses incurred in developing the prototype, including Research and Development costs, should be included in the assessable value. The Tribunal, in line with a Supreme Court judgment, emphasizes that intellectual inputs significantly enhance value, and thus, Research and Development expenses are integral to the intrinsic value of the prototype. Consequently, the Tribunal upholds the decision that Research and Development charges and Technological know-how fees are includible in the assessable value of the prototype radio.

Regarding the penalty imposed, the appellants argued that there was no concealment of facts or mala fide intent on their part to warrant a penalty. However, the Commissioner found that essential documents were not disclosed to the Department, justifying the imposition of a penalty. The Tribunal concurs with the Commissioner's findings on the invokability of Section 11A(1) and the imposition of a penalty. Despite the penalty being relatively low compared to the duty amount involved, the Tribunal upholds the penalty of Rs. 10,000 considering the non-disclosure of material facts and non-payment of duty on the entire value. Ultimately, the Tribunal rejects the appeal and affirms the decision to include Research and Development charges and Technological know-how fees in the assessable value of the prototype radio.