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2025 (1) TMI 1436 - AT - Central Excise


The judgment concerns the valuation of parts and components manufactured by the appellant for Maruti Suzuki India Ltd. (MSIL) under the Central Excise Act, 1944, and the Central Excise Valuation Rules, 2002. The primary issue is whether the notional cost of design and drawings provided free of cost by MSIL to the appellant should be included in the assessable value for excise duty purposes.

Issues Presented and Considered

The core legal question is whether the value of design and drawings supplied free of cost by MSIL constitutes an "additional consideration" under Section 4(1)(b) of the Central Excise Act, 1944, and should be included in the transaction value for excise duty purposes. This involves interpreting the relevant provisions of the Central Excise Act and the Central Excise Valuation Rules, 2002, particularly Rule 6.

Issue-wise Detailed Analysis

Relevant Legal Framework and Precedents

The case hinges on the interpretation of Section 4(1)(b) of the Central Excise Act, 1944, which deals with the determination of the value of excisable goods, and Rule 6 of the Central Excise Valuation Rules, 2002. The Tribunal also considered precedents such as the decision in CCE, Jamshedpur Vs. Tata Motors and Ors., and Denso India Private Limited Vs. Additional Director General (Adjudication).

Court's Interpretation and Reasoning

The Tribunal examined whether the free provision of design and drawings by MSIL to the appellant constitutes an "additional consideration" that should be added to the transaction value. It referred to the Denso India case, where it was determined that such notional costs should not be included in the assessable value. The Tribunal distinguished this case from the Tata Motors case, emphasizing that there was no contractual obligation for MSIL to pay anything over the agreed price for the parts and components.

Key Evidence and Findings

The Tribunal found that the designs and drawings were provided by MSIL before the identification of the appellant as a supplier and before any contractual obligation arose. The Tribunal noted that the cost of these drawings did not constitute an additional consideration because MSIL did not pay any amount over the agreed price after the issuance of the letter of intent.

Application of Law to Facts

The Tribunal applied Section 4(1)(b) and Rule 6, concluding that the notional cost of the designs and drawings could not be included in the assessable value. It emphasized that these were not expenses incurred by the buyer on behalf of the seller-manufacturer, which would relieve the manufacturer from incurring such expenses.

Treatment of Competing Arguments

The Tribunal addressed the Revenue's argument that the design and drawings were an additional consideration by highlighting the lack of any contractual obligation for MSIL to pay beyond the agreed price. It also referenced the Mangalore Refinery & Petrochemicals Ltd. case to differentiate between mere specifications and detailed engineering drawings, further supporting its conclusion.

Significant Holdings

The Tribunal held that the notional cost of the specifications, in the form of drawings and designs supplied free of cost by MSIL, cannot be included in the assessable value of the parts and components manufactured by the appellant. The Tribunal stated:

"It clearly transpires from the aforesaid provisions that something can be treated as an additional consideration for sale of goods only when there exists a contract of sale or an agreement to sell between the two parties and in terms of such an agreement the buyer pays something over and above the price agreed, either in cash or in kind to the manufacturer."

The Tribunal concluded that the impugned order should be set aside, and the appeals were allowed, emphasizing that the specifications provided by MSIL were necessary for manufacturing parts that fit into their vehicles but did not constitute an additional consideration under the relevant legal framework.

 

 

 

 

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