9911796707
TMI Blog2011 (3) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 paying Excise Duty on transfer price comprising elements of cost such as material, overhead, packing, conversion cost and margin of profit. Compared to the value on which excise duty used to be paid by the assessee when it had manufactured and cleared the impugned goods on its own account, the corresponding transfer prices of the products cleared under the manufacturing agreement were found to be considerably lower. It was observed that the assessable value adopted did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessable value of Senquel, Stolin, Senquel-F, Senquel-AD, Stolin Gum Astrigent, Stolin-R, Dologel, Metrohex, Dologel-CT, S-FLO and Clohex Oral on which the assessee had paid duty when these goods were manufactured and cleared by GP on its own account for determining the duty liability on the clearances made by the assessee during the material period. It was held that the real value for the purpose of payment of duty had to be determined in respect of each transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 4.2 The adjudicating authority failed to appreciate that the technical know-how alleged to have been provided by DRL as additional consideration being incapable of determination in terms of value for each clearance of the goods, could not be added to the transaction value. It was settled law that when a certain item was incapable of being valued, the question of adding the same (for assessment) did not arise. In the instant case, the technical know-h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture 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 be deployed for producing any quantity of the preparation even during a short span of time. Therefore, part of the value of the preparation attributable to the technical know-how cannot be reliably determined in respect of any preparation cleared by the assessee. Therefore, the Commissioner could not have validly resorted to Rule 6 of the Valuation Rules to determine the differential duty due on the impugned clearances. Moreover, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringe 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 the goods cleared, duty cannot be demanded. In other words, there is no computation mechanism at all. In any case, it cannot be said that the appellants received technical know-how freely from the buyer. It is the submission that the appellant had already knowledge of the technical know-how of the manufacture of the goods supplied to the buyer. So the amount of Rs. 50 lakhs received by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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