Custom, Excise & Service Tax Tribunal
Ms Precision Tech Enterprises vs Gurgaon on 8 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Excise Appeal No.60194 Of 2023
[Arising out of Order-in-Original No.01-07/2023-CE dated 10.01.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
M/s Precision Tech Enterprises : Appellant
GP-58, Sector-18, Maruti Industrial
Complex, Gurugram, Haryana-122015
VERSUS
Commissioner of CGST & Central
Excise, Gurgaon : Respondent
Division Gurgaon, HSIDC,Vanijya Nikunj, Udyog
Vihar, Phase-V, Gurugram, Haryana-122015
WITH
2. Excise Appeal No.60195 of 2023. [M/s Dynamic
Industries]
[Arising out of Order-in-Original No.01-07/2023-CE dated 10.01.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
3. Excise Appeal No.60196 of 2023. [M/s N T F India Pvt.
Ltd.]
[Arising out of Order-in-Original No.01-07/2023-CE dated 10.01.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
4. Excise Appeal No.60202 of 2023. [M/s Haryana
Industries]
[Arising out of Order-in-Original No.01-07/2023-CE dated 10.01.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
5. Excise Appeal No.60360 of 2023. [M/s NIFCO India Pvt.
Ltd.]
[Arising out of Order-in-Original No.70-92-CE/2023 dated 29.03.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
6. Excise Appeal No.60366 of 2023. [M/s Satra Agriculture
Engineers]
[Arising out of Order-in-Original No.70-92-CE/2023 dated 29.03.2023 passed by the
Principal Additional Director General (Adjudication), New Delhi]
APPEARANCE:
Shri Ram Chander Chaudhary, Advocate for the Appellant
Shri Aniram Meena with Shri Raman Mittal, Authorised Representatives
for the Respondent
CORAM:
HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL)
HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL)
2 E/60194/2023 and 05 others
FINAL ORDER Nos. 60054-60059/2025
DATE OF HEARING: 08.01.2025
DATE OF DECISION: 08.01.2025
S.S.GARG:
These six appeals are directed against the two impugned orders
dated i.e. 10.01.2023 and 29.03.2023 passed by the Principal
Additional Director General (Adjudication), New Delhi. The issue
involved in all the six appeals is identical, therefore, all the appeals
are taken up together for discussion and disposal. The details of all the
six appeals are given here in below:
Sl. No. Appeal No. Duty demand Period of dispute
confirmed (in in Appeal
Rs.)
1. E/60194/2023 Rs. 21,21,552/- 2013-14 to
2017-18
2. E/60195/2023 Rs. 83,190/- 2013-14 to
2017-18
3. E/60196/2023 Rs. 11,58,361/- 2013-14 to
2017-18
4. E/60202/2023 Rs. 12,18,628/- 2013-14 to
2017-18
5. E/60360/2023 Rs. 1,79,216/- 2013-14 to
2017-18
6. E/60366/2023 Rs. 2,62,939/- 2013-14 to
2017-18
2. Briefly the facts of the present case are that the show cause
notices were issued to all the vendors including the appellant who
supplied parts/components manufactured by them to M/s Maruti
3 E/60194/2023 and 05 others
Suzuki India Ltd. for further manufacture of motor Vehicles falling
under Chapter 87 of Central Excise Tariff Act, 1985. These show cause
notices were issued by Gurgaon Branch of DGGSTI on the issue of less
payment of Central Excise duty due to non addition of cost of
drawings and designs received by them on Free of Cost (FOC basis)
from M/s MSIL, in the assessable value of the components/parts
manufactured by them and supplied to M/s MSIL, demanding
differential duty along with interest from them and also proposed to
impose mandatory penalty upon them by invoking the extended
period of limitation on the ground of misdeclaration, suppression of
facts etc. with an intent to evade duty. After following the due
process, Principal Additional Director General (Adjudication) who was
appointed a centralized adjudicating authority to decide all the said
show cause notices, decided all the show cause notices and confirmed
the demand. Aggrieved by the said order, the appellant filed the
present appeal.
3. Heard both the parties and perused the record.
4. Ld. Counsel for the appellant submitted that the impugned order
is not sustainable in law as the same has been passed without
properly appreciating the facts and the law and the binding judicial
precedents. He further submits that this issue is no more res integra
and the Principal Bench of the Tribunal has disposed of 201 appeals
by a common order dated 12.03.2024; copy of the said order is also
furnished.
5. He further submits that the principal Bench in the case of Denso
India Private Limited Vs. Additional Director General (Adjudication)
set aside the demand by accepting the various appeals. He further
4 E/60194/2023 and 05 others
submits that the Department has not challenged the decision of the
Tribunal dated 12.03.2024 and it has become final.
6. On the other hand, Ld. AR reiterated the findings of the
impugned order.
7. After considering the submissions of both the parties and
perusal of the material on record and the decision of the Principal
Bench in the case of Denso India Private Limited cited (Supra) we
are of considered view that this issue is squarely covered by the
decision of the Principal Bench cited (Supra). The issue involved in
these appeals filed by various vendors of Maruti Suzuki India Ltd
which is engaged in the manufacture of motor vehicles and procures
the desired parts and components from vendors, is whether the
notional cost of drawings and designs supplied free of cost by Maruti
to the vendors should be included in the assessable value of parts
or components manufactured by vendors and cleared to Maruti for
the purpose of payment of central excise duty.
8. Here, it is pertinent to reproduce the findings of Division Bench
of CESTAT Delhi in the above noted case wherein, the Tribunal after
considering the provisions relating to valuation of goods as provided
under Section 4 of Central Excise Act and also the Central Excise
Valuation Rules, 2002 and few judgments of various courts on this
issue has held as under :
"23. The issue that arises for consideration in these appeals is
whether the department is justified in demanding the differential
central excise duty from the vendors by including the notional
cost of specification drawings and deigns supplied free of cost by
Maruti in the assessable value of parts or components of motor
5 E/60194/2023 and 05 others
vehicles manufactured by the appellants and cleared to Maruti.
24. To appreciate this issue, it would be useful to refer to the
relevant provisions of the Central Excise Act and the 2000 Valuation
Rules.
25. Section 4 of the Central Excise Act deals with „valuation of
excisable goods‟ for the purposes of charging of duty of excise and the
relevant portion is reproduced below:
"4. Valuation of excisable goods for
purposes of charging of duty of excise-
(1) Where under this Act, the duty of excise is
chargeable on any excisable goods with reference
to their value, then, on each removal of the goods,
such value shall-
(a) in a case where the goods are sold by
assessee, for delivery at the time and place
of the removal, the assessee and the buyer
of the goods are not related and the price
is the sole consideration for the sale be the
transaction value;
(b) in any other case, including the case where
the goods are not sold, be the value
determined in such manner as may be
prescribed."
26. It would be seen from a bare perusal of sub-section (1) of
section 4 that it provides for determination of the value of
excisable goods in the circumstances enumerated in (a) and (b)
of section 4(1). Clause (a) deals a situation where the goods are
sold by the assessee and the assessee and the buyer of the
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goods are not related and the price is sole consideration for the
sale. In this situation the transaction value has to be taken into
consideration for the purposes of charging duty of excise.
However, in any other case including a case where the goods
are not sold, the value, under clause (b) has to be determined in
such manner as may be prescribed.
27. Thus, section 4(1)(b) deals with the following situations:
(1) Where the goods are not sold by the assessee; or
(2) Where the assessee and the buyer are related persons; or
(3) Where the price is not the sole consideration for sale
between the manufacturer and buyer and there is an
additional consideration for sale of the goods.
28. The relevant portion of rule 6 of the 2000 Valuation Rules,
on which reliance has been placed in the show cause notice and the
impugned order, is reproduced below:
"6. Where the excisable goods are sold in the
circumstances specified in clause (a) of sub-section
(1) of section 4 of the Act except the circumstance
where the price is not the sole consideration for
sale, the value of such goods shall be deemed to be
the aggregate of such transaction value and the
amount of money value of any additional
consideration flowing directly or indirectly from the
buyer to the assessee.
Provided that where price is not the sole
consideration for sale of such excisable goods and
they are sold by the assessee at a price less than
manufacturing cost and profit, and no additional
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consideration is flowing directly or indirectly from
the buyer to such assessee, the value of such goods
shall be deemed to be the transaction value.
Explanation 1 - For removal of doubts, it is hereby
clarified that the value, apportioned as appropriate,
of the following goods and services, whether
supplied directly or indirectly by the buyer free of
charge or at reduced cost for use in connection with
the production and sale of such goods, to the
extent that such value has not been included in the
price actually paid or payable, shall be treated to be
the amount of money value of additional
consideration flowing directly or indirectly from the
buyer to the assessee in relation to sale of the
goods being valued and aggregated accordingly,
namely:-
(i) value of materials, components, parts and
similar items relatable to such goods;
(ii) value of tools, dies, moulds, drawings, blue
prints, technical maps and charts and similar
items used in the production of such goods;
(iii) value of material consumed, including
packaging materials, in the production of such
goods;
(iv) value of engineering, development, art work,
design work and plans and sketches
undertaken elsewhere than in the factory of
production and necessary for the production
of such goods."
8 E/60194/2023 and 05 others
29. It clearly transpires from the aforesaid provisions that
something can be treated as an additional consideration for sale
of goods only when there exists a contract of sale or an
agreement to sell between the two parties and in terms of such
an agreement the buyer pays something over and above the
price agreed, either in cash or in kind to the manufacturer.
Thus, anything which is supplied by the buyer to the
manufacturer before even identifying the potential manufacturer
as the supplier can never be treated as an additional
consideration for sale. It also transpires that the specification
drawings and designs were supplied by Maruti to the potential
vendors free of cost before the letter of intent was issued and
after the letter of intent was issued to the appellant the price of
goods was paid by Maruti to the appellant and no other amount
was paid, and it is not even the allegation made in the show
cause notice that the buyer had paid any amount to the
appellant over and above the consideration price after the letter
of intent was issued. It, therefore, follows that neither section
4(1)(b) of the Excise Act nor rule 6 of the 2000 Valuation Rules
could have been invoked in the facts and circumstances of the
case as no additional consideration towards sale has been
received by the appellant from Maruti.
30. Even under rule 6 of the 2000 Valuation Rules, the value
of four categories of goods and services specified therein can
be treated as the amount of additional consideration that can
be added to the assessable value of the goods. What
transpires from Explanation (1) to rule 6 is that:
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(i) Specified goods and services must be supplied
directly or indirectly by the buyer;
(ii) Such supplies must be made free of charge or at
reduced cost;
(iii) Such supplies must be made for use in connection
with the production and sale of goods;
(iv) The addition in the assessable value must be made
to the extent that the value of such goods and
services has not been included in the price actually
paid or payable; and
(v) The goods or services in question must fall within
any of the four clauses (i) to (iv) mentioned in
Explanation (1).
31. A plain reading of clauses (ii) and (iv) of Explanation (1) to
rule 6 of the 2000 Valuation Rules leaves no manner of doubt
that only those specified goods and services are covered
which are used in the production of goods in question or
which are undertaken elsewhere than in the factory of
production and necessary for the production of goods in
question.
32. It is clear that the purpose behind rule 6 is to levy excise duty
on all those expenses which are incurred by a buyer on behalf of the
seller-manufacturer and relieves the seller-manufacturer from
incurring such expenses. Thus, the expressions „drawings, blue prints,
technical maps and charts and similar items‟ mentioned in clause (ii)
of Explanation (1), and „design work and plans and sketches‟
mentioned in clause (iv) of Explanation (1) can only mean those
drawings and designs which a manufacturer would have prepared for
10 E/60194/2023 and 05 others
use in the manufacture of the product but were prepared by the buyer
and supplied to such manufacturer on free of cost or at reduced cost.
This is clear from the language used in clauses (ii) and (iv) of
Explanation (1) to rule 6 of the 2000 Valuation Rules. It covers
drawings which are used in the production of such goods and
those designs which are necessary for the production of such
goods.
33. The contention of the learned authorized representative
appearing for the department, however, is that the drawings/designs
supplied by Maruti were only and exclusively instrumental in
development of the product by the appellants. Learned authorized
representative also pointed out that it is not even the case of the
appellant that they could have manufactured the parts or component
without reference to the specification drawings supplied to them by
Maruti free of cost. Thus, the price was not the sole consideration and
the additional consideration flowing directly or indirectly from the
buyer to the appellant would be includable in view of the provisions of
rule 6 of the 2000 Valuation Rules.
34. It is not possible to accept this contention of the learned
authorised representative for the department. The specification
drawings were supplied by Maruti to the potential vendors for the
purpose of short-listing the vendors for supply of components of
vehicle. What is important to notice is that the item that is under
consideration in the present case is an engineering item. A buyer may
like to first identify the potential vendors who can supply the parts and
components of engineering items, and unless the potential vendor is
made aware of what is the requirement by way of design and drawing,
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the vendor may not be in a position to quote a price for the supply.
Thus, what information is supplied at the time of tender process by
way of specifications and drawings for inviting bids from potential
vendors is the specific requirement supplied free of cost to all those
who would participate in the tender process.
35. What is important to note is that the appellant had to prepare
detailed drawings and designs for which it received technical support
from its present company Denso Corporation. License Agreements
were entered into between the appellant and Denso Corporation for
grant of a non-exclusive right to the appellant to manufacture, use
and sell the licensed articles. In terms of the License Agreements, the
appellant paid running royalty to Denso Japan at the rate of 3 % of
the net sales of the licensed articles and the appellant paid service tax
on this amount. If the specifications and designs supplied by the
Maruti were sufficient for the manufacture of parts and components,
there would have been no necessity for the appellant to seek technical
support for manufacture in the form of detailed designs and
specifications and pay a huge royalty. The manufacture of the spare
parts and components by the appellant was, therefore, not possible
from the specification and designs supplied by Maruti. The
manufacture of the parts and components was possible only from the
detailed drawings prepared by the appellant.
36. Even if Maruti had to spend some amount for getting these
drawings by making payment of royalty to Suzuki Maruti Corporation,
Japan, the position would not change as this cannot be said to form an
additional consideration for sale of parts or components. It also needs
to be noted that these specification drawings provided by Maruti to the
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potential vendors cannot be said to be used in the production of the
components or necessary for the production of the components in
terms of rule 6 of the 2000 Valuation Rules. Thus, clauses (ii) or (iv)
to Explanation (1) of rule 6 of the 2007 Valuation Rules cannot be
invoked in the facts and circumstances of the present case.
37. At this stage, it would also be appropriate to compare
Explanation (1) to rule 6 of the 2000 Valuation Rules to an analogous
rule 10(1)(b) of the 2007 Customs Valuation Rules. This rule 10(1)(b)
is reproduced below:
"10. Cost and services - (1) In determining
the transaction value, there shall be added to
the price actually paid or payable for the
imported goods-
(a) *****
(b) the value, apportioned as appropriate, of
the following goods and services whether
supplied directly or indirectly by the buyer
free of charge or at reduced cost for use in
connection with the production and sale for
export of imported goods, to the extent that
such value has not been included in the price
actually paid or payable, namely:-
(i) materials, components, parts and similar
items incorporated in the imported goods;
(ii) tools, dies, moulds and similar items used in
the production of the imported goods;
(iii) materials consumed in the production of the
imported goods;
13 E/60194/2023 and 05 others
(iv) engineering, development, art work, design
work, and plans and sketches undertaken
elsewhere than in India and necessary for
the production of the imported goods."
(emphasis supplied)
38. Rule 10(1)(b) has been borrowed from article 8.1(b) of the
Agreement on Implementation of Article VII of the General Agreement
of Tariffs and Trade1. Under the GATT Agreement as also the 2007
Customs Valuation Rules, the specified goods and services are
informally known as „assists‟, the value of which is includable in the
assessable value of imported goods. The expression „necessary for the
production of the imported goods‟ appearing in clause (iv) of rule
10(1)(b) of the 2007 Customs Valuation Rules has been interpreted in
the context of „assists‟ not to include those design which merely
specify the requirement of a buyer or dimension of the product.
39. In this connection, it would be useful to reproduce the relevant
portion of Customs Valuation - Commentary on the GATT Customs
Valuation Code by Saul L. Sherman and Hinrich Glashoff. The learned
authors have observed that the value of detail specifications, including
various dimensions noted on a drawing of the machine, which merely
provide the requirement of the buyer and inform the manufacturer of
the specifications of what is being ordered, cannot be said to be
dutiable „assists‟ under clause (iv) of article 8.1(b) of the GATT
Agreement. The relevant portion of the book is reproduced below:
"Detailed specifications, including various
1
. the GATT Agreement
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dimensions noted on a drawing of the
machine, are included in the buyer's order, so
as to advise the exporter/manufacturer of
what the buyer needs. The cost of engineering
and drawing are not part of customs value,
even if undertaken outside the country to
which the machine is shipped, to the extent
that they are an appropriate way of ordering
the machine - that is, of telling the
manufacturer the specifications of what is
being ordered. Only if the engineering or drawing
goes further should it be deemed to be a part of the
production process. Up to that point, each
specification and instruction is more appropriately
regarded as an added requirement or burden
imposed upon the manufacturer, rather than a form
of assistance. Otherwise expressed, these are
buying costs, not costs of the seller from which he
is being relieved by the buyer."
(emphasis supplied)
40. The Tribunal in Mangalore Refinery & Petrochemicals Ltd.
vs. C.C., Mangalore2 also held that there is a distinction between
mere specifications and detailed engineering drawing. It is only the
latter which is covered under rule 9(1)(b)(iv) of the Customs Valuation
(Determination of Price of Imported Goods) Rules, 1988 (which is now
rule 10(1)(b)(iv) of the 2007 Customs Valuation Rules). The relevant
portion of the decision of the Tribunal is reproduced below:
"9.3 When a person buys a product available,
off-the-shelf, he need not be concerned with
2
. 2014 (313) E.L.T. 353 (Tri. - Bang.)
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the Engineering Design and services which
have gone into the manufacture of such
product. He has to merely order by giving the
specifications. If a person wants to buy an air-
conditioner, he may specify whether it should
be window type or split type and also specify
the tonnage besides the brand name. He may
consult a specialist to identify such
requirements. These specifications are in the
nature of "buyers' assist" and the cost
incurred for getting such specifications cannot
become part of value of the goods in the
hands of the supplier.
9.4 When a sophisticated technology is
involved in the manufacture of any products
and the process involved in the manufacture is
a patented one, the equipments required have
to be compatible with the patented process
and assistance may be required before
ordering such equipments. In such a case, the
Engineering services utilized for preparing
tender documents will be in the nature of
"buyers' assist" and the same cannot be
treated as necessary in the hands of the
manufacturer of the equipments for the
purpose of manufacture of such equipments.
*****
11. A close analysis of the legal provisions extracted in para 9.1 above and the decisions relied upon by both sides, the following important guidelines/principles emerge :
16 E/60194/2023 and 05 others
(a) As already noted, the transaction value to be determined under Rule 4 of the Customs (Valuation) Rules envisages adjustments to be made in accordance with the provisions of Rule 9 of the said Rules. This is evident from the observation contained in the decision dated 21-
2-2008 of the Hon‟ble Supreme Court in the case of Commissioner of Customs v. Ferodo India Pvt.
(b) The value of certain goods and services meant "for use in connection with the production and sale for export of imported goods" requires to be added to arrive at the transaction value as per Rule 9(1)(b). In particular, the value, of "engineering, development, art work, design work, and plans and sketches undertaken elsewhere than in India and necessary for the production of the imported goods" requires to be added.
(c) The Rule permits inclusion of only engineering drawing, design, etc., "necessary for the production of the
imported goods". Rule does not envisage remote connection between "engineering drawing, design, etc." and "the imported goods". The gap between Basic Engineering Drawings and detailed drawing is vast. The one provides all the detailed inputs for undertaking manufacture. The other merely indicates the lay out, relative size etc. From the size specifications alone construction of engineering 17 E/60194/2023 and 05 others equipment is not feasible. "Telling the manufacturer, the specification of what is being ordered" is only in the nature of buyers' assist. Cost incurred towards buyers' assist cannot be included in the value of imported goods.
(d) When the technical know-how and engineering services are not related to the equipment designs but are for the purpose of preparation of tender documents and for recommending for selection of the equipments the cost of the same cannot be included in the value of imported goods."
(emphasis supplied)
41. The same view was taken by the Tribunal in G.E. Plastics India Ltd. vs. Commissioner of Customs, Mumbai-I3 and the observations are as follows:
"6. It is the Revenue‟s case that the process diagram and equipment specification supplied by M/s. GE Plastics India Pvt. Ltd. BV, Netherlands were vital for the preparation of detailed engineering drawings for the manufacture of the imported equipment and that is sufficient to attract the provisions of the Rule. The Commissioner (Appeals) has noted that the enquiry documents were prepared on the basis of Basic Engineering Package. This reasoning of the Commissioner is not supported by the Rule. Rule does not take in such remote 3 . 2004 (169) E.L.T. 46 (Tri. - Del.) 18 E/60194/2023 and 05 others connection. The Rule permits inclusion of only engineering drawings, designs etc. "necessary for the production of the imported goods". That is to say, the material in question should be directly necessary for the production of the imported goods. The gap between Basic Engineering Drawings and detailed drawing is vast. The one provides all the detailed inputs for undertaking manufacture. The other merely indicates the lay out, relative size etc. From the size specifications alone construction of engineering equipment is not feasible. From a perusal of the process chart, it is clear that it only indicated the layout and volume specifications of individual equipment. It is merely a sketch representation of the plant. It was not possible to manufacture equipment based on this. Further, if it were to be so, the appellant would not engage another engineering firm, namely, Davy Power Gas India Pvt. Ltd. for developing the detailed design/engineering drawing. *****"
(emphasis supplied)
42. In the present case, Maruti provided specifications of the parts or components to be fitted in the motor vehicles manufactured by Maruti to the potential vendors. The parts or components have necessarily to be manufactured as per the requisite dimensions of the parts or components so that they can be fitted in the vehicles manufactured by Maruti. It is for this reason that Maruti shared the requirements at the „Request for Quotation‟ stage. The detailed drawings and designs were prepared by the Research and 19 E/60194/2023 and 05 others Development Division of the appellant with the help of technical support received from Denso, Japan. Maruti does not have the necessary technology to manufacture the products. As such, the technology has been patented by the parent company of the appellant, namely Denso, Japan for which the appellant has also been paying running royalty amount for receipt of technical support. The appellant has also included the cost incurred towards preparation of detailed drawings and designs in the assessable value of the final products.
43. To appreciate this issue, reference can also be made to the specifications provided by Maruti to the potential vendors for „generator assembly‟ for manufacture of alternators. It bears the endorsement „THIS IS A DESIGN SPECIFICATIONS DRAWING‟. It is also mentioned that „this drawing specifies the conditions that Suzuki requires from suppliers on shape, dimensions, functions, qualities etc., part(s)/assembly‟ and „suppliers shall be responsible for designing the part(s)/assembly to meet Suzuki‟s requirements shown in the drawing without infringing upon any third party‟s intellectual property rights and submit the drawing‟.
44. It is apparent from the aforesaid that the specifications provided by the Maruti were merely layout or dimensions of the desired parts or components. The appellant prepared detailed drawings and designs for alternator assembly in line with the specifications provided by Maruti. The designs prepared by the appellant contain details of various elements to be used in the manufacture of alternator assembly. It contains 23 sub-components required for manufacturing alternator assembly, which is not even 20 E/60194/2023 and 05 others referred to in the specification drawings provided by Maruti to the appellant.
45. The Letter of Intent issued to the appellant also states that:
"We are pleased to inform that you have been selected as one of our vendors for the following components. We intend placing an order on you for the design, manufacture, testing and supply of the subject component(s) for MARUTI vehicles at prices indicated below. *****"
(emphasis supplied)
46. This would show that it is the responsibility of the appellant to design and manufacture the parts or components. Thus, the specification drawings are neither used in the production of the components nor are they necessary for the production of the components. Rule 6 of the 2000 Valuation Rules is, therefore, not attracted.
47. Learned authorized representative appearing for the department has placed reliance upon the decisions of the Tribunal in TATA Motors and Avtec Ltd. These decisions deal with cases of drawings supplied by the motor vehicle manufacturers to the manufacturers of parts and components free of cost, but the designs were supplied after the sale agreement was executed and the manufacturer used the same for producing the components. There is nothing in these decisions which may indicate that the specification drawings were supplied at the stage of tender process and identification of vendors, nor does it transpire from the said decisions that after receipt of specification 21 E/60194/2023 and 05 others from buyer, the vendors prepared their own detail drawings and designs on the basis of which the final components were manufactured.
48. Learned authorized representative appearing for the department has also placed reliance upon the decision of the Supreme Court in Moriroku. This judgment of the Supreme Court does not come to the aid of the department. The said judgment deals with the provisions of UP VAT Act for levy of VAT on the sale of goods. The issue that arose before the Supreme Court was whether amortization cost of toolings was includible in the sale price of auto components, as in the case of excise duty under Central Excise Act, 1944. In other words, the issue was whether the department was right in equating sales tax to excise duty.
49. The present appeals do not relate to toolings being supplied free of cost by Maruti to the appellant. In fact, the show cause notice also admits that tooling cost has been amortised and excise duty has been paid.
50. The inevitable conclusion, therefore, that follows from the aforesaid discussion is that the notional cost of drawings and designs supplied free of cost by Maruti to the vendors cannot be included in the assessable value of the parts and components manufactured by vendors and cleared to Maruti for the purpose of payment of central excise duty.
51. In this view of the matter, it would not be necessary to examine the contention that has been raised by the learned counsel for the appellants that the extended period of limitation could not have been invoked in the facts and circumstances of the present case.
22 E/60194/2023 and 05 others
52. Thus, for all the reasons stated above, all the Excise Appeals have to be allowed. The five Excise Appeals filed by traders have also to be allowed for the additional reason that in any view of the matter central excise duty could not have been levied on them.
53. In the result, the impugned orders dated 29.07.2022, 25.08.2022, 30.11.2022, 30.12.2022, 10.01.2023, 23.02.2023, 30.03.2023 and 28.04.2023 passed by the adjudicating authority deserve to be set aside and are set aside. All the Excise Appeals are, accordingly, allowed.
9. By respectfully following the ratio of the above said decision, we are of considered view that the impugned orders are not sustainable in law and thereafter, we set aside the same by allowing all the six appeals of the appellants with consequential relief if any, as per law.
(Operative part of the order dictated in the open Court) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) KAILASH