ORDER
Chittaranjan Satapathy, Member (T)
1. Heard both sides.
This appeal is against the impugned order which has been passed in remand proceedings. Shri S.P. Majumdar, ld. Advocate appearing for the Appellants states that there are four issues involved in this case.
2. The first issue relates to valuation of the impugned goods taken for captive consumption. The duty demand relating to this issue is Rs. 7,85,230/-. We find that the Adjudicating Commissioner has held that the amounts reflected in the debit notes on which Excise Duty has not been paid has to be included in the invoice price as the sum of the two would represent the value of the impugned goods under Rule 6(b)(ii) of the Valuation Rules, 1975. The ld. Advocate claims that the amount reflected in the debit note represents abnormal expenditure which is not liable to be included in the assessable value. In our view, the said contention has been rightly rejected by the Adjudicating Commissioner. We also note that the remand order of the Tribunal did not require this issue to be reopened in the remand proceedings as the same was confined to the other three issues. As such, the demand in respect of this issue stands confirmed.
3. The second issue relates to inclusion of designs and development charges relating to manufacture and clearance of the impugned goods. The duty demand on this issue is Rs. 3,65,300/-. After perusal of the related purchase orders, we find that the designs and drawings for specific machines were given to the buyers as per the contract, who did not want the appellants to manufacture any goods using such designs for other customers. Shri Majumdar, ld. Advocate argues that the cost of these designs and drawings are for supply of the same representing the value of the intellectual property contained in the designs and drawings and the same is not required to be added to the value of the impugned goods. However, we find that for producing the goods these designs and drawings were essential without which the goods could not have been manufactured. As such, the value of these designs and drawings have to form cost of the integral part of the value of the impugned goods manufactured using the same. The fact that these designs and drawings have been handed over to the buyers goes to show that the entire value of such designs have to be included in the value of the impugned goods. In case, the designs were retained by the appellants and other goods were manufactured using the same, then there would have been a case for (sic) the value of designs over all the goods produced using the same. Since that is not the case, we are of the view that the Adjudicating Commissioner is correct in including the entire value of the designs and drawings in such cases while arriving at assessable value of the impugned goods. Consequently, the demand of Rs. 3,65,300/- is confirmed.
4. The third issue relates to addition of notional interest on advances. We find that the Department has not shown as to how the prices were influenced by the advances taken and there is no comparison to bring out any evidence that the same goods have been sold to the buyers at higher price who have not given advances. As such, the case law cited by the ld. Advocate relating to Commissioner of Central Excise, Mumbai-III v. I.S.P.L Industries Ltd. is squarely applicable to the facts of this case. The said decision of the Hon’ble Supreme Court clearly holds that no presumption can be drawn by mere fact of interest (sic) free advance by the buyer to the manufacturer and that burden to prove that the interest free advance has influenced the price lies on the Revenue, which in this case has not been discharged by the Revenue. Hence the demand of Rs. 4,97,221/- relating to this issue is set aside.
5. The fourth issue relates to assessment under Notification No. 120/75-CE dated 30.04.1975 which allowed assessment on the basis of invoice price. It is the department’s case that in respect of the impugned goods the value of materials used in the manufacture and in some cases cost of drawings and designs supplied by the customers have not been included in the invoice value. Hence, the Adjudicating Commissioner has held that conditions (iii) (iv) of the impugned Notification No. 120/75-CE dated 30.04.1975 have been contravened. The ld. Advocate for the Appellants cites in this regard the decision of the Hon’ble Supreme Court in the case of Texmaco Ltd. v. Collector of Central Excise, Calcutta which holds that the intention of the notification is to permit assessment on the invoice value even though the assessable value may be higher. In particular, the Hon’ble Supreme Court has referred to the value of wheelsets supplied by Railways not having been included in the cost of wagons and have held that under the impugned Notification No. 120/75-CE assessment on the basis of invoice value which excludes the cost of wheelsets is permissible. In view of the said decision of the Hon’ble Supreme Court we have no option but to set aside the demand of Rs. 6,77,305.92 confirmed by the Original Authority against the appellants.
6. As regards the penalty imposed, we find in the original proceedings the penalty of Rs. 1.00 lakh was imposed whereas in the remand proceedings a penalty of Rs. 2.00 lakhs has been imposed. The ld. Advocate argues that firstly in the remand proceedings the appellants cannot be visited with a higher penalty when the remand was as a result of their appeal before the Tribunal. Secondly, he (sic) that since the issue involved in this case relates to interpretation of law, a lenient view may be taken and no penalty may be imposed. Considering the entire facts and circumstances of the case and that the appellants have been allowed relief partly in respect of two issues, we reduce the penalty imposed from Rs. 2.00 lakhs to Rs. 25,000/- (Rupees Twenty Five thousand only). (sic) The appeal is partly allowed in the above terms.
Dictated and Pronounced in the open Court.