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TMI Blog2017 (3) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of CAS-4. The appellant is however challenging imposition of penalty. It has been argued that CAS-4 came into being in the year 2003 and immediately thereafter appellant paid the said differential duty along with interest. It has been argued that period under dispute is prior to introduction of CAS-4 valuation. It has been argued that they were of bonafide belief that the bonus and gratuity need not to be included in the value for the purpose of transfer of goods from one unit to another. In these circumstances, they have sought relief of penalty imposed. 4. Ld. A.R. argued that the matter was clarified by CBEC in 1996. He particularly relied on the decision of Hon'ble Apex Court in case of Commissioner of C. Ex., Ahmedabad Versus Asarwa Mills [2015 (319) E.L.T. 216 (S.C.)]. He argued that in the said case same issue was agitated before the Hon'ble Apex Court and Hon'ble Court held that extended period cannot be invoked for the period April, 1994 to September, 1996 only. 5. We have gone through rivals submissions. 6. We find that decision of the Hon'ble Apex Court in case of Asarwa Mills(supra) is on the identical subject. In para 8 and 9 of the said decision of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said case decided by the Hon'ble Apex Court and question at hand. In view of the specific observations of the Hon'ble Apex Court, the demand beyond the normal period of limitation is set aside. The penalty under Section 11AC is also set aside. The appeal is partly allowed. (b) Appeal No. E/1513/06 & E/1611/06 These appeals have been filed by M/s. Century Enka Ltd in respect of valuation of the goods manufactured by the appellant and transfer to their own plant located at Mahad. 2. The issue involved in the present case is that if in the valuation of such goods on basis of CAS-4 certificate royalty needs to be included while determined the value or not. In respect appeal No. E/1513/06 for the period July, 2000 to March, 2002, the adjudicating authority while confirming demand, penalty has been imposed under Section 11AC. In respect of Appeal No. E/1611/06 for the period April, 2002 to March, 2003, while demand has been confirmed alongwith interest, penalty under Rule 26 has not been imposed. Aggrieved by the said Orders, the appellant is before this Tribunal. 3. Ld. Counsel for the appellant argued that royalty charges are not includible in the value of the goods in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing stock of work-in-progress & finished goods In terms of CAS-1 the research and development cost is part of the cost of production.. In terms of CAS-1 in para 6.2.6 prescribed as under: 6.2.6 Direct expenses are the expenses other than direct material or direct labour which can be identified or linked with the cost centre or cost object. 6.2.7 Examples of direct expenses are * Expenses for special moulds required in a particular cost centre * Hiring charges for tools and equipments for a cost centre * Royalties in connection to a product * Job processing charges etc. It can be seen that expenses of royalties in connection to the product expenses for special moulds, hiring charges for tools and equipments for cost centre and job processing charges are includible. Para 6.3.7 of CAS-1 prescribed as under : 6.3.7 Selling costs are indirect costs related to selling of products or services and include all indirect cost in sales management for the organization. 6.3.8 Selling Costs include all costs relating to regular sales and sales promotion activities. Examples of expenses which are included in selling cost are : * Salaries, commission and traveling exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacture, treatment and processing of the products, including designs, specifications, source of availability of raw material, additives, auxiliary chemicals, specifications of material, components, chemicals intermediates, detailed process sequences, labour and output norms, enery consumption norms and other cost parameters, pollution control and effluent discharge testing and qualify control procedures, as available. "Product" shall mean polyester and nylon(polyamide-6) textile filament yarns, polyester and nylon(polyamide-6) industrial yars, tyre cord and tyre cord fabrics. Article 2-LICENCE reads as under: 2.1 For the term of this Agreement, 'AIF' hereby grants CE an exclusive, non-transferable, non assignable licence, without the right to grant sub-licnece, to use the Know-how for the manufacture and use of the Products in the Plants, and a non exclusive, non-transferable, non assignable licence, without the right to grant sub-licences, to sell the Product in India. The consideration has been given in Article 4, which reads as under: Article-4-CONSIDERATION 4.1(a) In consideration of the licence granted by AIF to CE, CE shall pay to AIF a running roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactured by the appellant are not covered by the definition of the product and thus royalty paid, if any, cannot be added for the purpose of arriving at assessable value of the chips in terms of CAS-4. 10. The appellant have relied on the decision of this Tribunal in this case of Glaxo Smithkline Cons. Healthcare Ltd(supra). Para 6 of the order reads as under: "6. We have considered the various points urged by both the sides carefully. The only issue to be decided is whether the royalty charges are includible at the bulk stage. We find that the Central Excise authorities in Patiala and Sonepet had already decided the issue in partys favour by following the CAS-4. The Tribunal also in the decisions cited supra has clearly held that the principles enunciated in CAS 4 would be applicable even for the past cases. It is also seen that the royalty charges based on sales are already included in the price fixed for retail sales. To us entire exercise appears to be revenue neutral. We do not find any merit in the impugned order. Therefore we allow the appeals with consequential relief. It is seen that the said decision is based on revenue neutrality. In the instant case, however appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e covered under the direct expenses and will required to be added to the cost of the product under assessment. Since under the disputed period the goods were being assessed on the basis of costing principles, there is no reason not to include the royalty charges to the cost of the product prior to issuance of the circular also. Since the cost of the product is being arrived for the purpose of determination of assessable value the same principles as mentioned in CAS4 are applicable for the past period also. Therefore, we hold that the royalty charges are required to be added to the cost of production of goods in question. 10. We also find that the royalty is being paid by the appellant on account of manufacture, sales, installation and service of the product at the rate of 3.5% of net works billing price. We find that while determining the cost of production the royalty charges are required to be limited upto the manufacturing stage only and the other activities like sales, erection and service are not to be taken into account while computing the cost of production of the components used captively. We therefore agree with the submission of the appellant that 3.5% of the entire bil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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