2017 (1) TMI 291 - AT - Central Excise

Valuation - inclusion of modification charges in assessable value - Rule 5 and Rule 6 of Valuation Rules, 2000 - Held that - The process of modification was an essential and integral part of manufacturing process. Since these tools and dies had been retained in the factory against D-3 procedure for manufacture of components, additional sum of money received by the appellants as modification charges for the very same tools/dies is liable to be included in the assessable value in terms of Rule 5 of Valuation Rules, 1975 and Rule 6 of Valuation Rules, 2000 - reliance was placed in the case of Garlick Engineering Vs. CCE, Bombay 1998 (4) TMI 221 - CEGAT, NEW DELHI , where it was held that designing and engineering charges collected from buyers under separate debit notes were deemed to be part of invoice price irrespective of fact that they were not shown in the invoice but in separate debit notes. Extended period of limitation - Held that - Since the fact of realization of the additional amounts vide debit notes was not disclosed by the appellants to the department at any stage, it amounts to suppression of vital facts from the department and therefore, we hold that proviso to Section 11A(1) has been correctly invoked for demanding the excise duty beyond the normal period of one year. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Inclusion of modification charges in the assessable value of goods.
2. Invocation of proviso to Section 11 of CEA, 1944.
3. Recovery of duty with interest and imposition of penalty.
4. Allegation of suppression and invocation of extended period.

Analysis:
1. The appeal involved the inclusion of modification charges in the assessable value of goods. The appellant had developed tools/dies for a customer and later made modifications before dispatch. The revenue contended that modification charges should be included in the assessable value. The adjudicating authority confirmed the demand of duty with interest and penalties. The Ld. Commissioner (Appeals) directed inclusion of modification charges in the assessable value as per Valuation Rules and upheld the allegation of suppression and imposition of penalty.

2. The invocation of the proviso to Section 11 of the Central Excise Act, 1944 was a key issue. The appellant argued that subsequent modifications after the sale of goods should not lead to liability for excise duty. The appellant claimed that the demand was time-barred as details regarding modification charges were provided during audit. The tribunal held that the proviso to Section 11A(1) was correctly invoked due to the non-disclosure of additional amounts received through debit notes, constituting suppression of vital facts.

3. The case also addressed the recovery of duty with interest and imposition of penalties. The Ld. Commissioner (Appeals) directed a fresh order for imported tools/dies and upheld the inclusion of modification charges in the assessable value. The tribunal supported this decision based on the integral role of modifications in the manufacturing process and previous case law regarding the inclusion of additional charges in the invoice price.

4. The issue of alleged suppression and the invocation of the extended period for demanding excise duty beyond the normal timeframe was crucial. The tribunal held that non-disclosure of modification charges amounted to suppression of facts. The tribunal differentiated this case from precedents where deliberate suppression was not indicated. Consequently, the longer period of limitation was correctly applied, leading to the dismissal of the appeal.

In conclusion, the tribunal upheld the order of the Ld. Commissioner (Appeals) regarding the inclusion of modification charges in the assessable value, the invocation of the proviso to Section 11A(1) for suppression of facts, and the imposition of penalties. The appeal was dismissed, affirming the decision on all issues.