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TMI Blog2011 (3) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 11AC of the Central Excise Act, 1944 (the Act). The appellants are engaged in the manufacture and clearance of Preparations for Oral and Dental Hygiene falling under CSH 3306.90 (henceforth Preparations ) of Central Excise Tariff Act, 1985. The assessee had manufactured these excisable goods under a manufacturing agreement and cleared the same to M/s. Dr. Reddy s Laboratories Ltd. (DRL for short). They paid duty on transfer price comprising raw material cost and conversion charges including the profit margin of the assessee. The period of dispute is from 1-3-2002 to 7-1-2005. 2. The facts of the case are that the assesee entered into three agreements with DRL. Under Agreement dated 19-12-2001, called Deed of Assignment, the assessee had assigned the Trade marks to DRL of various Preparations owned by it for a consideration of Rs. 1,50,00,000/-. Under Agreement dated 20-12-2001 called Technical Know-how Agreement, the assessee sold technical know-how for the manufacture of these Preparations for a consideration of Rs. 16.5 crores. Under a Manufacturing Agreement entered between the assessee and DRL on 7-1-2002, GP manufactured and cleared the goods in question by pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the same could not be added for the purpose of determining the assessable value of such products for discharge of duty of excise. There was no legal justification to adopt the value of such goods charged prior to transfer of technical know-how for payment of duty on goods manufactured under agreement after transfer of technical know-how. Such goods were also manufactured for third parties under similar agreements. Invocation of longer period of limitation was challenged as the assessee had declared the revised price of the impugned goods to the department in time. 3.1 The Commissioner rejected the defence put up by the assessee against the proposals contained in the show-cause notice. He held that technical know-how required for manufacture of the preparations involved was a vital resource without which manufacturing activity could not be carried out. The real value of the goods involved had to include the cost attributable to technical know-how. He resorted to Rule 6 of Central Excise Valuation Rules and held that the transaction value included the cost of technical know-how which apparently got subsumed in the sale price of DRL. The Commissioner adopted the respective ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of technical know-how to DRL for a period of five years and that it had retained the right to use the same technology for itself for contract manufacture for third parties. The Agreement did not make DRL the absolute owner of the technical know-how. After the transfer of technical know-how, GP was commercially able to provide contract manufacturing activity at a price lesser than the price before transfer of such technical know-how. GP manufactured similar goods for third parties such as M/s. Elan Pharma Ltd., M/s. Mirco Labs Ltd., M/s. Fourts India Ltd. and M/s. Clearock during the material period. In respect of clearances to these parties also, the transaction value adopted was arrived at following the same method as in the case of clearances to DRL. 4.1 Revenue had made no attempt whatsoever in determining the money value of the additional consideration for the purpose of adding the same to the transaction value. The show-cause notice merely sought to apply the transaction value of goods cleared by the appellant before the assignment of brand names and transfer of technical know-how. This was not consistent with the legal provisions including Rule 6 of the Valuation Rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on a much higher value prior to GP entering into manufacture agreement with DRL. The assessee had tried to evade duty due on the Preparations manufactured and cleared during the material period. The impugned order deserved to be sustained. 7. We have carefully considered the case records and studied the rival submissions. In the instant case, the appellant manufactured select preparations for dental and oral hygiene under a Manufacture Agreement dated 7-1-2002 and cleared the same to DRL during the material period. The proposal in the show-cause notice is to include money value of the additional consideration relatable to technical know-how employed by the assessee to manufacture the impugned goods after it had sold the same to DRL under the technical know-how agreement dated 20-12-2001. However, we find that the differential duty is computed and confirmed comparing the assessable value adopted for the impugned clearances with corresponding value of such goods cleared by the assessee prior to its entering into the manufacture agreement with DRL. We find that the demand has no sustainable legal basis. We note that technical know-how relating to any particular preparation can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said section defines the scope of fringe benefits provided by the employer to his employees. Similarly, sub-section (2) of the said section defines the scope of fringe benefits deemed to have been provided by the employer to his employees. Therefore, sub-section (2) expands the scope of sub-section (1) through a deeming provision. The provision relating to the computation of the value of the fringe benefits is contained in section 115WC. It is a settled principle of law that where the computation provisions fail, the charging section cannot be effectuated. Therefore, if there is no provision for computing the value of any particular fringe benefit, such fringe benefit, even if it may fall within clause (a) of sub-section (1) of section 115WB, is not liable to FBT. 7.2 In the Bangalore Pharma Research Laboratory P. Ltd. case (supra) relied on by the assessee, the Tribunal had dealt with a similar dispute relating to assessable value of certain medicines manufactured using technical know-how which the assessee had sold to the buyer. The Tribunal had made the following observations : In the absence of a proper mechanism to attribute the value of the technical know-how to th ..... 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