Custom, Excise & Service Tax Tribunal
Firmenich Aromatics India Private ... vs Daman on 30 October, 2019
Customs, Excise & Service Tax Appellate Tribunal,
West Zonal Bench : Ahmedabad
REGIONAL BENCH - COURT NO. 3
EXCISE Appeal No. 11106 of 2017
[Arising out of Order-in-Original /Appeal No OIO-DMN-EXCUS-000-COM-040-16-17 dated
15.02.2017 passed by Commissioner of Central Excise & ST, Daman]
Firmenich Aromatics India Private Limited .... Appellant
Survey No.57/3(6,8,9), Bhenslore Road,
Village: Dunetha, DAMAN, GUJARAT-396210.
VERSUS
Commissioner of Central Excise & ST, Daman .... Respondent
3rd Floor, Adarsh Dham Building, Vapi-Daman Road, Vapi, Opp.Vapi Town Police Station, Vapi, Gujarat APPEARANCE :
Shri Abhijit Saha, Advocate for the Appellant Shri S.K. Shukla, Superintendent for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) FINAL ORDER NO. A/11997 / 2019 DATE OF HEARING: 11.07.2019 DATE OF DECISION: 30.10.2019 RAMESH NAIR :
The brief facts of the case are that the appellant having Central Excise registration engaged in the manufacturing of excisable goods falling under Chapter heading 29 and 33 of the Central Excise Tariff Act, 1985. During CERA audit, the audit has observed that the appellant has paid Royalty Charges for technical knowhow during the period 2012-13 to 2014-15 but has not included this Royalty Charges in assessable value of finished goods as is evident from cost audit report furnished by the appellant whereas technical knowhow (Royalty Charges) are to be included in the assessable value, even if the goods are captively consumed, as per the guidelines issued by the Council of the Institute of Cost and Works Accountants of India 2 EXCISE Appeal No. 11106 of 2017 on "Cost of production for Captive Consumption" under Cost Accounting Standard 4 (CAS-4). This has resulted in short payment of Central Excise duty. On this observation, show cause notice was issued to the appellant which was adjudicated by the Adjudicating Authority whereby it was held that since the Royalty Charges was not included in the assessable value, the excise duty is chargeable on the same accordingly, demand of Central Excise duty of Rs. 14,58,91,908/- was confirmed under Section 11A (4) of Central Excise Act, 1944 and interest under Section 11AA of Central Excise Act, 1944 was also demanded. A penalty of equal amount of duty i.e. Rs. 14,58,91,908/- was also imposed under Section 11AC of the Central Excise Act, 1944. Being aggrieved by the said impugned order, appellant filed the present appeal.
2. Shri Abhijit Saha, Learned Counsel appearing on behalf of the appellant submits that right from audit objection, the appellant has made submission that the appellant have included Royalty Charges paid to the foreign collaborator, in the assessable value of their final product and the entire case is made out and adjudicated on the incorrect understanding of facts. He submits that appellant have submitted a Chartered Accountant's certificate dated 19 March 2016 whereby it was certified that the Royalty Charges are included in the entry of Sales and Distribution Overheads, as the same are paid only as percentage of sales value. Therefore, Royalty charges has been included in the assessable value, which is transaction value at which the goods are sold.
3. Learned Counsel placed reliance on the following decisions:-
(a) Castrol India Limited vs. CCE & Cus., Vapi - 2014 (311) ELT 71 (Tri. Ahmd.) 3 EXCISE Appeal No. 11106 of 2017
(b) CCE vs. Chemphar Drugs & Liniments - 1989 (40) ELT 276 (SC)
(c) CCE vs. HMM Limited - 1995 (76) ELT 497 (SC)
(d) CCE, Aurangabad vs. Bajaj Auto Limited - 2010 (260) ELT 17 (SC)
(e) Anand Nishikawa Company Limited vs. CCE, Meerut - 2005 (188) ELT 149 (SC)
(f) CCE, Mumbai vs. CMS Computers Pvt. Limited - 2005 (182) ELT 20 (SC)
(g) Nizam Sugar Factory vs. CCE, A.P. - 2006 (197) ELT 465 (SC)
(h) Dolphine Detective Agency vs. CCE, Belgaum - 2006 (4) STR 25 (Tri. Bang.)
(i) PSL Corrosion Control Services Limited vs. CCE, Daman -
2009 (237) ELT 495 (Tri. Ahmd.)
(j) CCE, Coimbatore vs. Best Cotton Mills Limited - 2009 (243) ELT 77 (Tri. Chennai)
(k) CCE, Meerut vs. Fabrico India (P) Limited - 2010 (249) ELT 38 (Tri. Del.)
(l) CCE, Chandigarh vs. Punjab Laminates Pvt. Limited - 2006 (202) ELT 578 (SC)
(m) Modipon Fibre Company vs. CCE, Meerut - 2007 (218) ELT 8 (SC)
(n) CCE, Chandigarh vs. Nachiketa Paper Limited - 2008 (225) ELT 194 (P&H)
(o) Pratibha Processors vs. UOI - 1996 (88) ELT 12 (SC)
(p) Jaiswal Products vs. CCE, Delhi - 2016 (344) ELT 636 (Tri. Del.) 4 EXCISE Appeal No. 11106 of 2017
(q) JK Tyre & Industries Limited vs. CCE, Mysore - 2016 (340) ELT 193 (Tri. LB)
(r) Bharat Heavy Electrical Limited vs. CCE, Kanpur - 2016 (323) ELT 417 (All.)
4. Shri S.K. Shukla, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He also placed reliance on the following judgments :-
(a) CCE, Calcutta vs. Eastern Che-Mofarb Limited - 1996 (81) ELT 341 (Tri.)
(b) Pepsi Foods Limited vs. CCE, Chandigarh - 2003 (158) ELT 552 (SC)
5. We have heard both sides and perused the record. We find that the entire case is made out on the basis that the Royalty Charges is includable in the assessable value in case of captive consumption. Reliance is placed on the guidelines issued by Council of the Institute of Cost and Works Accountants of India on "Cost of Production for Captive Consumption." As per facts of the present case, the consumption of excisable goods is not for captive consumption but for home consumption and on principal to principal sale basis. Therefore, the guidelines relied upon by the department has no relevance in the present case. Now, coming to the facts that whether the transaction value at which goods were sold and excise duty was paid, included the Royalty Charges paid by the appellant to the foreign collaborators. The appellant, time and again maintained that the Royalty Charges is clearly included as Sales and Distribution Overheads. Therefore, there is no doubt that the Royalty Charges is included in the overall value of the excisable goods. After the amended valuation provisions, from 2000 5 EXCISE Appeal No. 11106 of 2017 onwards, the duty is chargeable on the actual transaction value at which the goods are sold and therefore, any overhead charges cost of manufacture or selling expenses, everything stand included in the transaction value of the finished goods. Therefore, only expenses on account of Royalty Charges not shown in the cost of manufacture of the product will not make any difference as the same is admittedly stand included as Selling and Distribution expenses in the overall transaction value. It is evident from the Chartered Accountant's that Royalty Charges paid to foreign company stand included in the transaction value. The said certificate is reproduced below:-
6. It is also noteworthy that the show cause notice also admit that the Royalty Charges is shown as Sales & Distribution overhead in the appellant's 6 EXCISE Appeal No. 11106 of 2017 books of account. This itself proves that the Royalty Charges is indeed included in the transaction value. The judgment cited by Learned AR is relevant only in case where the Royalty Charges are not included in assessable value, which is not a case here. Therefore, since the Royalty Charges is included in the transaction value on which the excise duty is discharged correctly, no duty can be demanded. Accordingly, we set-aside the impugned order and allow the appeal.
(Pronounced in the open court 30.10.2019) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) KL