Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of Central Excise vs Nttf Industries Ltd. on 30 March, 2004
Equivalent citations: 2004(169)ELT92(TRI-BANG)
ORDER K.C. Mamgain, Member (T)
This appeal is filed by the Revenue against the Order-in-Appeal No. 627/2000-C.E., dated 14-11-2000.
2. Shri L. Narasimha Murthy, learned SDR appearing for the Revenue pleaded that the Respondents M/s. NTTF industries are manufacturers of excisable goods falling under Chapter 84 of Schedule to Central Excise Tariff Act. They have availed Modvat credit in January 1998 on design and supply of blue print received by them from sub-contracted supplier. The supplier have not manufactured any excisable goods which are specified under the schedule to Central Excise Tariff Act, 1985 and the item is not covered as input under Notification No. 12/96-C.E. (N.T.), dated 23-7-1996. The Assistant Commissioner has disallowed the Modvat credit of Rs. 1,13,360/- availed on design and development charges on the ground that the subject item is not covered as an input under Rule 57-A and Notification No. 12/96-C.E. (N.T.), dated 23-7-1996. However, the Respondents filed appeal before the Commissioner (Appeals) who remanded the case for de novo consideration with direction that value of design charges if includable in the assessable value of final product manufactured by the respondents, the benefit of Modvat credit should be extended.
3. He pleaded that the Respondents have sub-contracted design and moulds to their another manufacturing unit and such unit have undertaken the engineering job of designing and preparation of blue prints of moulds. On completion of such assigned engineering job, the sub-contractor raised invoice under Rule 52-A of Central Excise Rules as if design and moulds are excisable goods and discharged central excise duty under sub-heading 8480.10 which is totally incorrect as the said unit have not manufactured any excisable goods which are specified under Schedule to Central Excise Tariff Act. The Commissioner (Appeals) did not appreciate that the appellants are manufacturers of moulds and the design and development charges paid to the sub-contractors form part of the cost of manufacture of moulds. They can avail Modvat credit only in respect of excisable goods specified under Central Excise Tariff on which Central Excise duty have been discharged by the supplier and which are physically received in the factory and used for the manufacture of excisable goods. The design and development charges incurred by another unit cannot be considered for taking Modvat credit only on the ground that expenses incurred by the Respondent firm form part of the value of final product totally ignoring the principle and procedure prescribed under Modvat scheme.
4. Shri T. Ramesh learned advocate appeared for the respondents and he pleaded that the duty paid by them on design and development can be taken as Modvat credit as these designs will be used for manufacture of moulds. He relied on the decision of Tribunal in the case of Kirloskar Cummins Ltd. v. CCE, Pune -1999 (108) E.L.T. 395. He therefore pleaded that the Order of the Commissioner (Appeals) may be upheld.
5. We have carefully considered the submissions made by both sides. We find that design and development charges are not excisable goods. These have been incorrectly classified under sub-heading 8480.10 to pay duty. The design and development charges are also not eligible inputs under Rule 57A of the Central Excise Rules. The decision of CEGAT in the case of Kirloskar Cummins Ltd. v. CC£, Pune (supra) have taken note that in that case, certain parts of IC engines were being developed by M/s. Poona Shrims for IC engines manufactured by the Kirloskar Cummins Ltd. M/s. Poona Shrims supplied components of IC engines and also paid duty on design and development charges on the same gate pass under which the components of IC engines were supplied and stated that since they cannot quantify the number of components which will be manufactured from that design and development, therefore they are charging these as one time measures separately. The matter was remanded back to Assistant Commissioner to make enquiries from the jurisdictional AC of input-supplier about the circumstances under which duty was collected on design and development charges.
6. This is not the position in the present case. In the present case, the design and development charges were paid by that unit which was not manufacturing any excisable goods. Such unit was neither required to pay any duty on design and development charges nor the charges are excisable goods. Therefore, the question of allowing Modvat credit on duty paid on such charges does not arise. We therefore, find that the ratio of the decision in the case of Kirloskar Cummins Ltd. v. CCE (Supra) is not applicable in the present case.
7. We therefore set aside the order of the Commissioner (Appeals) and allow the appeal of Revenue.