2014 (1) TMI 53 - AT - Central Excise

Manner of Amortization of cost Amortization cost to be included in Assessable value or not - Revenue was of the view that instead of amortizing the cost of moulds/dies of bumpers over their normal life expectancy period, the amortization should be done over period during which these moulds/dies were actually used Held that - The appellant have paid duty on the value which included the amortization cost of the moulds/dies and that the amortization cost has been determined on the basis of the total cost of the moulds/dies and the total number of parts which could be manufactured by using the moulds/dies during their total life expectancy - in terms of the Board s Circular No. 170/4/96-CX, dated 23-1-1996, the amortization cost of patterns which are used for making castings is to be determined on the basis of their expected life and capability of the patterns and the quantity of castings that can be manufactured from them and thus working the cost to be apportioned per unit - Following South East Electronic Components Pvt. Ltd. v. CCE, Meerut 2002 (12) TMI 517 - CEGAT, NEW DELHI order set aside Decided in favour of Assessee.

Summary

Issues:
- Dispute over amortization cost of moulds/dies for bumpers
- Alleged short payment of duty
- Imposition of penalty
- Cenvat credit recovery

Analysis:

1. Dispute over Amortization Cost of Moulds/Dies for Bumpers:
The case involved a dispute regarding the amortization cost of moulds/dies for front and rear bumpers supplied to Maruti Udyog Ltd. The appellant determined the cost based on total value, life expectancy, and parts likely to be manufactured. The Department contended that the amortization should be based on the actual period of use, not the total life expectancy. The appellant argued that the Department's view was incorrect and contrary to Circular No. 170/4/96-CX. They cited precedents and Circular provisions to support their position. The Tribunal found that the cost should be determined based on expected life and capability of the patterns, as per the Circular and past judgments. Consequently, the Department's stand was deemed unjustified, and the impugned order was set aside.

2. Alleged Short Payment of Duty:
The Department issued a show cause notice alleging short payment of duty due to the disputed amortization cost calculation. The Commissioner confirmed a duty demand against the appellant, along with interest and penalty under Section 11AC of the Central Excise Act, 1944. However, the Cenvat credit was dropped. The appellant appealed against this order, leading to the Tribunal's decision to set aside the impugned order due to the lack of justification for the Department's position.

3. Imposition of Penalty:
In addition to confirming the duty demand, the Commissioner imposed a penalty equal to the duty amount under Section 11AC of the Central Excise Act, 1944. The appellant challenged this penalty in the appeal, which was allowed by the Tribunal upon setting aside the impugned order.

4. Cenvat Credit Recovery:
The show cause notice also sought recovery of Cenvat credit in respect of the written-off value of the moulds/dies. The Commissioner dropped this recovery in the original order. The appellant did not contest this aspect in the appeal, and the Tribunal did not address it separately in the judgment.

In conclusion, the Tribunal's decision in this case primarily revolved around the correct determination of the amortization cost of moulds/dies for bumpers, ultimately setting aside the duty demand and penalty imposed by the Commissioner. The judgment emphasized adherence to Circular provisions and established legal principles in determining such costs, leading to the appeal being allowed in favor of the appellant.