2012 (7) TMI 572 - AT - Central Excise

Assessable value inclusion of value of bought out items and drawing and design charges collected from their clients Held that - Entire drawing and designing charges involved in the 8 contracts in the department s appeal and 5 contracts involved in the assessee-appellant s appeal can be apportioned in the ratio of 50 50 towards general drawing and designing charges in respect of the plant of the customers - matter remanded to the original authority for the limited purpose of determining the duty liability on the value of drawing and designing charges in respect of the manufactured components after allowing 50% abatement towards general drawing and designing charges

Summary

Issues:
1. Inclusion of drawing and design charges in the assessable value of manufactured components.
2. Apportionment of drawing and design charges between manufactured and bought out components for duty calculation.
3. Dispute regarding general drawing and designing charges not related to supply of goods.

Analysis:

Issue 1: Inclusion of drawing and design charges
The appellant-assessee, engaged in manufacturing and supplying boiler systems, faced a dispute with the department regarding the inclusion of drawing and design charges in the assessable value of the manufactured components. The department proposed to charge duty on these charges, leading to appeals by both parties.

Issue 2: Apportionment of drawing and design charges
In Appeal No.E/467/04, the lower appellate authority had dropped the demand for duty, which was contested by the department. In Appeal No.E/756/04, the adjudicating Commissioner apportioned the drawing and design charges between manufactured and bought out components for duty calculation. The appellant-asseessee were not contesting this apportionment but raised concerns about the general drawing and design charges unrelated to the supplied components.

Issue 3: Dispute over general drawing and designing charges
The appellant-asseessee contended that the adjudicating Commissioner had ignored the part of drawing and design charges related to general drawing and design of the plant at the client's premises, which was not linked to the components supplied. Both parties agreed to apportion the charges in a 50:50 ratio for general drawing and designing charges and those attributable to manufactured and bought out components.

The Tribunal accepted the proposal from both sides to resolve the long-pending disputes. The impugned order in Appeal No.E/467/04 was set aside, and in Appeal No.E/756/04, the order was modified. The matter was remanded to the original authority to determine the duty liability on the value of drawing and designing charges for manufactured components after allowing 50% abatement towards general drawing and designing charges unrelated to the supply of components. The penalty imposed in Appeal No.E/756/04 was confirmed for a nominal amount.

In conclusion, both appeals were allowed based on the agreed terms for apportioning drawing and design charges, providing a resolution to the disputes pending for over two decades.