Custom, Excise & Service Tax Tribunal
M/S. Hindustan Safety Glass Works Ltd vs Commr. Of Central Excise, Kolkata Iii on 20 March, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, EAST REGIONAL BENCH : KOLKATA
S. P. No. 326/07
&
Ex. Appeal No. 371/07
(Arising out of Order-in-Original No. 55/COMMR./CE/KOL-III/2006-07 dated 31.03.2007 passed by the Commissioner of Central Excise, Kolkata III).
M/s. Hindustan Safety Glass Works Ltd., Applicant (s)/
Appellants (s)
VERSUS
Commr. of Central Excise, Kolkata III Respondent (s)
APPEARANCE SHRI K.K. Banerjee, ADVOCATE, for the Applicant / Appellant (s) SHRI Y. S. LONI, JDR, for the respondent CORAM:
SHRI P. KARTHIKEYAN, HONBLE TECHNICAL MEMBER SHRI D. N. PANDA, HONBLE JUDICIAL MEMBER DATE OF HEARING & DECISION : 20. 03. 2008 ORDER NO/2008 Per Shri P. Karthikeyan:
This is an application filed by M/s. Hindustan Safety Glass Works Ltd., for waiver of predeposit and stay of recovery of duty of Rs. 1,34,580/-, equal amount of penalty and appropriate interest.
2. After hearing both sides on the stay application, we dispense with the requirement of predeposit and take up the appeal for disposal.
3. The facts of the case are that the investigation conducted by the Departmental officers revealed that the appellant had used prototypes for production of their final products viz. Toughened Glass, Safety Glass etc., made to order by different customers. The appellant charged for the sample (prototype) from the customers.
4. The case of the Department is that the appellants did not include the cost of moulds/samples/prototype so supplied by he customers in the final products manufactured using such samples. In reply to the allegation that the appellant had not paid the duty on the amortized cost of the samples/moulds, the cost of which was incurred by the customers, the appellant has submitted that moulds are not manufactured by them and that in many cases moulds were lying in the factory. Duty would be paid when the moulds are removed. The impugned order therefore is not sustainable.
5. The Ld. DR submits that the appellant had not included the amortized cost of the moulds/prototype in the goods manufactured and cleared using such prototype. As the cost of such moulds was incurred by the respective buyers, the proportionate value has to be legitimately included in the assessable value.
6. We have considered the submissions. We find from the submissions of the appellant before the Commissioner that amortized cost was not included in the value of the products manufactured using prototype. The counsel has submitted before us that the Department had to link the moulds and their cost with the products manufactured using the moulds. This was not done. We find that this submission has not been made before the original authority or in the appeal. Therefore, we discard the argument.
7. We find that the related proposal in the show cause notice was as follows:
It appears that the development charges were not included in the assessable value of the goods as would be apparent from the assessees letter HSGW:CE:RS:GMMC dated 18.12.2000 in which it was stated by them that, Development charges are paid by the customers as and when payable by cheque/DD by those customers directly to us and no invoicing is done. However, these are reflected in our balance sheets. We once again want to emphasize that we realize these charges only form selected OE customers who send specifications for new automobiles (and not at all on regular items which we produce at our works). These charges include making drawing both for protocol and non protocol designing and developing samples as per prototype supplied by these customers. We find that Central Excise duty was not paid on the development charges was also stated by the assessee in their letter referred to above. It was contended that since they had not removed the prototypes/samples from their factory the question of paying duty does not arise. They stated that;
These samples are not cleared from our factory and are kept in a separate place. When we manufacture and sell these products as sample, we realize from the customers and pay excise duty at normal rate. If these customers want the samples developed by our factory, we will pay excise duty obviously. Since all such samples are lying in the factory the question of paying duty on development charges for such samples lying in our factory does not and should not arise.
8. The reply submitted by the appellant is as follows:
As regards development charges, as referred to in para 4 (b) of the impugned notice, the Noticee submits that the amount paid by some of the customers was for developing samples as per the specification supplied by them. If such samples are required by the customers, we realize the amount towards the cost of such development and pay duty on the goods when cleared. But in most of the cases after development the patterns (samples) are kept in the respective factories of the Noticee. The question of payment of duty will arise when such patterns would be cleared from the factory. The patterns are still lying in the factory. It is submitted that the development charges must be linked to a particular product manufactured out of developed patterns. Nothing has been said or ascertained in this regard in the impugned notice. Duty cannot be demanded directly on development charges. Refer: Ashok Iron Works Ltd. Vs. Commissioner of Central Excise, Belgaum 2004 (168) ELT 198.
9. The finding of the Commissioner in the impugned order in this regard is as follows:
The Notice proposes recovery of duty on development charges received by the noticee. For the present noticee i.e. Calcutta unit of M/s.Hindustan Safety Glass Works Ltd., this amount was Rs. 8,08,000/- in total during the material period. The Notice has admitted this amount received on this head of income. The amount of Rs. 8,08,000/- received as development charges was for developing design, moulds etc. specifically for manufacture of glass items sold to specified customers. Without this the product cannot be manufactured to suit requirement of the customer. Hence, very clearly such charges received should go in the assessable value of the goods.
10. We find that the amortized cost is rightly includible in the assessable value of the products manufactured using such moulds. The demand has to be with reference to the assessable value of such final products. No exercise is seen to have been done to relate mould and its cost to the respective final products. In the circumstances, we set aside the impugned order and remand the matter to the Commissioner for a fresh decision. Needless to say that the appellant shall be afforded an effective hearing before the decision is taken.
(Dictated and Pronounced in the the Open Court)
( D. N. PANDA ) ( P. KARTHIKEYAN )
JUDICIAL MEMBER TECHNICAL MEMBER
k.b/-
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Excise Appeal No. 371/07