2018 (10) TMI 1413 - AT - Central Excise

Valuation - includibility - For the purpose of manufacture of raw casting, they have got some patterns manufactured on job work basis from the job worker and paid for such pattern to the job worker. Subsequently, said patterns were sold to the buyer of raw casting - whether amortization cost of such patterns would be included in assessable value or not? - time limitation. Held that - There is no dispute in the fact that the appellant have used the pattern which belong to the buyer of the goods, which means the appellant have manufactured final product by the use of patterns, supplied free of cost by the buyer to the appellant - As per Rule 6 of Central Excise valuation Rules, 2000, the consideration equal to the value of the goods supplied free of cost has to be included in the assessable value - the amortization cost of pattern was rightly included by the lower authority in the assessable value of final product. Time Limitation - validity of second SCN - Held that - The appellant has shown income from sales of patterns in the balance sheet from which no one can make out that whether the sales of pattern is related to those patterns which were used in the manufacture of final product for buyer by using pattern belonging to the buyer. Therefore, there is a clear suppression of facts and mis-declaration on the part of the appellant - the second Show Cause Notice is for the period which is prior to the period of first Show Cause Notice. Since, there is a clear suppression of facts in both the show cause notice, 5 years period is available to the Revenue for issuing the sub-Show Cause Notice. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Inclusion of amortization cost of pattern in the value of final product.
2. Whether the demand is hit by limitation.

Analysis:
1. Inclusion of amortization cost of pattern in the value of final product:
The case involved a dispute regarding the inclusion of the amortization cost of patterns used in the manufacture of raw casting in the assessable value of the final product. The appellant argued that the cost of the pattern was already included in the value of the finished goods. However, the tribunal referred to Rule 6 of the Central Excise Valuation Rules, 2000, which states that the value of goods supplied free of cost by the buyer to the assessee must be included in the assessable value. The tribunal concluded that the amortization cost of the pattern used by the appellant had to be included in the transaction value, even if the appellant claimed it was already included. Therefore, the demand based on this issue was deemed sustainable.

2. Limitation on demand:
Regarding the issue of limitation, the appellant argued that the extended period for issuing the show cause notices was not valid. The appellant claimed that there was no suppression of facts as the sale of patterns was reflected in the balance sheet. The tribunal, however, noted that there was a clear suppression of facts and mis-declaration by the appellant. Referring to the judgment in the case of Nizam Sugar Factory, the tribunal differentiated the present case from the precedent, stating that the second show cause notice period was not for a subsequent period but for a previous one. Therefore, the tribunal upheld the demand based on limitation and dismissed the appeals.

In conclusion, the tribunal upheld the decision of the lower authority, confirming the demand for the inclusion of the amortization cost of the pattern in the value of the final product. Additionally, the tribunal ruled that the demand was not barred by limitation, as there was a clear suppression of facts by the appellant. As a result, the appeals were dismissed, and the impugned order was upheld.