2026-VIL-1651-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Includability of mould modification service charges in assessable value of bumpers under Rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Appellant procured moulds from third party manufacturers, availed Cenvat Credit thereon and sold them to the buyer on payment of VAT while retaining the moulds in its factory for manufacture of bumpers and amortising their cost in the sale price of bumpers on which excise duty was discharged. Separately, on the buyer's instructions, the appellant carried out modifications to the moulds and collected service charges, discharging service tax on the same - Department alleged that the service charges towards mould modification were required to be included in the amortised cost of the moulds for arriving at the transaction value of the bumpers - Whether the service charges collected by the appellant from the buyer for carrying out modifications to the moulds are required to be included in the amortised cost of the moulds for the purpose of arriving at the assessable value of the bumpers under Rule 6 of the CEVR, 2000 - HELD - The modification charges are not additional consideration for the sale of bumpers but consideration for a distinct and independent service rendered by the appellant, on which service tax was discharged; for a payment to qualify as additional consideration under Rule 6, there must be a nexus between the consideration and the transaction value of the goods under clearance, and no such nexus was established by the department - Explanation 1 to Rule 6 deals with the value of tools, dies, moulds and similar items provided by the buyer free of cost or at reduced cost to the manufacturer; in the present case the moulds were purchased by the appellant and sold to the buyer on payment of VAT, and are not supplied free of cost, so the Explanation does not extend to service charges for modification or repair work on moulds whose cost has already been amortised - Reliance placed on Circular No. 170/4/96-CX, which addresses amortisation of the cost of patterns in the assessable value of castings, is misplaced as it does not address service charges for modification of moulds on which service tax has been discharged - The appellant's practice accords with Accounting Standard 10 - The service charges collected for mould modification are not includable in the assessable value of the bumpers under Rule 6, being consideration for a service and not additional consideration for the bumpers - Demand on this count is not sustainable on merits and set aside – The appeal is allowed - Limitation - Invocation of extended period under proviso to Section 11A of Central Excise Act, 1944 and imposability of penalty under Section 11AC - Whether the extended period of limitation under the proviso to Section 11A was rightly invoked, and whether penalty under Section 11AC is imposable - HELD - Misstatement or suppression of fact must be wilful, that is, with intent to evade duty, and mere non-payment of duty does not amount to suppression; the burden of establishing the ingredients attracting the extended period lies on the Revenue - The department had conducted an audit of the appellant's records in 2014 and the show cause notice arose from that very audit; the appellant had been filing its returns regularly, paying service tax on the mould modification charges, and amortising the cost of moulds, so every material fact alleged to have been suppressed was already within the knowledge of the department or readily ascertainable from its records - Where the department has conducted an audit and was fully aware of the assessee's activities, it cannot be said that there was any misstatement or fraud, and the extended period is not invokable – Further, the issue is genuinely one of interpretation - The finding of suppression is not supported by any positive or deliberate act of concealment - Since the entire demand falls beyond the normal period, if the extended period is not invokable, the entire demand falls.
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