2024-VIL-811-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Double taxation with reference to central excise duty - Manufacture of goods using tools supplied free of charge by the buyer – appellant had collected the cost of tools from the buyer-customers by raising excise invoices but the value of the same were neither included in the cost of production nor amortized for payment of duty on the final products manufactured by using such tools – confirmation of demand for duty in terms of Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 – whether the cost of tools supplied by the buyer free of charge back to the appellant, includible as an amortised cost, when the said tools are used in the appellants factory for manufacture of components for the said buyers, in terms of Rule 6 of CVR 2000 - HELD - The fact whether the tools were manufactured in the appellants factory or was outsourced by the appellant from another company would not change the legal position as per CVR 2000 so long as they were paid for by the buyer-customer. The tools manufactured and used for production of components at the cost of the buyer and against purchase orders, needs to be included in the cost of production and amortized for payment of duty on the final products manufactured by the appellant using such tools - Double taxation with reference to central excise duties on goods means levying central excise taxes twice on the very same excisable product, which is not the case here. In this case the appellant pays central excise duty first on the tools, which are capital goods as defined in CENVAT Credit Rules, 2004 manufactured for the buyers. Subsequently duty is paid on the final products, manufactured by using the capital goods. Both are two separate set of excisable goods. Had they purchased the tools from the market its price would have automatically entered the price of the final product sold by them. Hence the question of double taxation does not arise – however, appellant are eligible for the benefit of Notification No.67/95 – CE dated 16.03.1995 for the tools captively manufactured for the buyer and used in their factory for the manufacture of final products for the buyer. The excise duty element would hence not form a part of the amortised value of the tools and it needs to be re-worked out suitably – appeal is partly allowed - Appellant has collected certain payments towards ‘development NVH project charges’. However, the amount collected towards rendering the services were neither included in the cost of production nor amortised for the payment of duty on the final products manufactured using the services – HELD – Appellant claims that excise invoice were raised by mistakes since it was a standard format, therefore, the service provided falls out of the ambit of excise duty since service tax is discharged - the issue again is not whether tax has been discharged, but whether the value of goods or services which has been paid for by the buyer and used for development of the buyers tools that has been further used by the appellant for the manufacture of the final product for the said buyer has been amortised. Amortisation is understood as an accounting method for spreading out the costs of an asset over the expected period the said asset will provide value. Amortizing the value of tools viz., jigs and fixtures, molds and dies will include amortizing its total monetary value (i.e. both of the tools manufactured and services rendered to the buyer for the manufacture of the tools). The cost incurred by the buyer in such cases would have to form part of the amortised cost of the final product (less the duty exemption eligible on the tools). The issue of double taxation is not a valid argument - Whether the extended time limit could have been invoked in this case – HELD - the requirement of law is that mere failure or negligence in adopting the correct value and making the correct payment of duty cannot be considered as suppression of fact with intention to evade payment of duty, especially when the issue was complex. Something more is required to show that there was a positive intention to evade payment of duty. We do not find any such reason or finding in the impugned order – No grounds to invoke the extended period and the demand for the larger period must fail.
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