9911796707
TMI Blog1994 (11) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18-3-1976 entered into between the appellant company the said NRDC, the appellant company was to collect royalty from the manufacturers of caustic soda who used the TSI anodes to manufacture caustic soda. Accordingly, the appellant company had in its contract for manufacture and supply of TSI anodes incorporated clauses whereby the buyers would pay the appellant company recurring royalty calculated pro rata to the quantum of caustic soda manufactured by them and the royalty so collected was passed on to NRDC after deducting administrative charges. A notice dated 18-11-1985 was issued by the Superintendent of Central Excise to the Appellant Company directing them to show cause as to why the Royalty so collected by the Appellant Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalty amounts received by their letters dated 16-8-1984 and 27-8-1984 in response to Department`s query dated 25-4-1984. Ld. Counsel urged that at the material time both the assessee and the Department were under the impression that royalty received was not includible in the assessable value, and that matter was apparently taken up only on the CER Audit raising an objection. In these circumstances, pleaded the Ld. Counsel, the appellants case is covered by ratio of Supreme Court decision in the case of Tamil Nadu Housing Board v. Collector of Central Excise - 1994 (74) E.L.T. 9 (SC) = 1994 (55) ECR 7 wherein the Supreme Court had held that the Department can invoke longer period under Section 11A Central Excises & Salt Act, 1944 only on est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention in the manufacture of anodes on payment of royalty which is invariably collected by the appellants from all their customers and the liability to pay royalty is also known at the time of clearance. The ld. S.D.R. urged that the royalty amount is linked to the manufacture of anodes by the appellants and the payment on that account by their customers is an additional consideration flowing from the purchases to the manufacturer. Therefore, it has to be added to the assessable value, for which ld. S.D.R. relied upon Tribunal`s decision in the case of Collector of Central Excise v. Metal Box - 1989 (39) E.L.T. 79. Reference was also made to the comprehensive reasoning on this aspect in the impugned order of the Collector. On the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration for using the invention by the appellants for manufacturing TSIA and as to how such consideration shall be worked out and paid. From this it is clear that the royalty paid is for the right to use the patented invention in the manufacture of TSIA which is the activity the appellants are engaged in. The royalty paid has a direct nexus to TSIA manufactured by the appellants. Hence, the Collector has rightly concluded by his detailed reasoning in the impugned order that this royalty element must necessarily form part of the cost of TSIA produced by the appellants and not for the manufacture of caustic soda by the customers of the appellants. The collection of the amount from the caustic soda manufactured by the appellants is an inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TSIA supplied by appellants. It is also agreed that if royalty is not payable by appellants to NRDC or if it is reduced, the appellants will stop charging royalty or may do it at the reduced rate. In such a situation, it cannot reasonably be held that the appellants had knowingly withheld the information from the Department with intention of evading payment of duty. It is well-settled that in such circumstances, the Department is not justified in invoking the longer period - see the Supreme Court decision in the case of Tamil Nadu Housing Board v. Collector of Central Excise - 1994 (74) E.L.T. 9 (SC) = 1994 (55) ECR 7 cited before us by the ld. Counsel. It is, therefore, held that the demand in this case is to be limited to six months unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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