2018 (2) TMI 126 - AT - Central Excise

Valuation - includibility - design charges of GR Pipes - Held that - the design and drawing charges collected by the appellants were only in respect of GR pipes which they subsequently sold to M/s. BSES - there is a direct nexus between the said charges collected and the pipes sold to M/S. BSES - The amount of Rs. 6, 20, 400/- surely was an additional payment required to be done by M/s. BSES and ors. to the appellants herein by reason of order in connection with the sale of the impugned GR pipes. The addition of such charges for arriving at the assessable value cannot then be disputed - demand upheld. Penalty - Held that - the controversy has emanated only on account of interpretational error on the part of the appellants who had held the view albeit incorrect - there is no suppression on the part of the appellants for which reason the penalty is set aside. Appeal allowed in part.

Summary

Issues:
1. Whether design charges collected by the appellants should be added to the assessable valueRs.
2. Whether penalty under section 11 AC of the Central Excise Act, 1944 can be imposed on the appellantsRs.

Analysis:
1. The appellants, engaged in the manufacture of composite pipes, collected design charges from a customer for GR pipes supplied, which were not included in the transaction value. The department contended that the design charges should be added to the assessable value, leading to a differential duty liability. The appellate tribunal found a direct nexus between the design charges and the pipes sold, stating that the charges were an additional payment by the customer in connection with the sale of the pipes. The tribunal upheld the demand of the duty on the design charges, citing the broad definition of transaction value under the Central Excise Act, 1944. Therefore, the appeal on this issue was dismissed.

2. Regarding the penalty under section 11 AC, the tribunal noted that the interpretational error by the appellants led to the controversy, as they believed that the design charges should not be included in the transaction value. Since there was no suppression of facts by the appellants, the penalty was set aside. The tribunal allowed the appeal on this issue, providing consequential reliefs. The judgment emphasized that the penalty was waived due to the appellants' incorrect interpretation, without any intention to suppress information.