2016 (9) TMI 577 - AT - Central Excise

Valuation - amortization of the coast of dies/moulds on the value of the goods manufactured - dies/moulds cleared on payment of duty to various parties - adoption of Rule 6 - Held that - it is found that in the name of amortization what has been done, is simply to take the value of Dies/Moulds and charge excise duty on such value. No effort has been made by the Revenue to arrive at the amortization cost of Dies/Moulds on scientific basis. We find it difficult to approve such amortization on a summary basis simply by referring Rule 6. It is found that the Dies/Moulds through cleared on payment of duty to their customers were received in their factory under invoices. It is also on record that the appellant has availed the Cenvat Credit of the duty paid on such Dies/Moulds upon their return to appellant s factory for use in the manufacture of goods for the customers. It is not clear whether through such invoices only the Cenvat duty paid on the Dies/Moulds have been returned or whether the cost of such Dies/Moulds also stands returned. In the latter case, the dies/Moulds would effectively become free supply in the hands of the appellant. The value of the goods manufactured by the appellant should include the appropriate fraction of the cost of Dies/Moulds as it have been given in the explanation of Rule 6, but, we are not convinced that the amortization has been properly done on a scientific basis. Therefore, the matter needs to be remanded to the Original Adjudicating Authority for re-examination of the matter. - Appeal allowed by way of remand

Summary

Issues:
Dispute over duty demanded for amortization of the cost of dies/moulds on the value of manufactured goods.

Analysis:
The appellant challenged the order based on Rule 6 of Central Excise Valuation Rules, 2000, arguing that excise duty was already paid on the dies/moulds supplied free of cost, hence Rule 6 need not be adopted. Additionally, it was contended that there was no loss of revenue as an exemption under Notification No. 67/1995 could have been utilized to avoid duty payment on the cost of dies/moulds.

The dispute primarily revolved around Rule 6 of the Central Excise Valuation Rules, 2000, which mandates inclusion of the value of tools, dies/moulds, etc., supplied free of charge in the assessable value of finished goods. The rule requires amortization of the cost of dies/moulds when supplied by the buyer for production and sale of goods. However, the tribunal found that the amortization done by the revenue was not based on a scientific basis as required by the rule. The appellant's argument that excise duty was already paid on the dies/moulds and no further amortization was necessary was considered valid.

The tribunal noted discrepancies in the treatment of dies/moulds by the revenue, highlighting the lack of proper amortization methodology. It was observed that the value of goods should include a fraction of the cost of dies/moulds as per Rule 6, but the current approach lacked scientific basis. Consequently, the matter was remanded to the Original Adjudicating Authority for a re-examination to determine duty demand in accordance with the observations made. The appellant was to be given an opportunity to present their case during the re-examination.

In conclusion, the impugned order was set aside, and the appeal was allowed by way of remand for a thorough re-evaluation of the duty demand concerning the amortization of the cost of dies/moulds on the value of manufactured goods.