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2023 (1) TMI 590 - AT - Central ExciseValuation of goods - confectionary items - related party transaction - inclusion of cost of moulds / dies / machinery supplied by the buyer - Valuation to be governed by Rule 9 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 or not - demand alongwith interest and penalty - HELD THAT:- The issue involved in the instant case is the valuation of the goods manufactured by LHL on behalf of ITC wherein, the ITC has provided certain inputs, machineries and funds to LHL. The LHL and ITC have contended that the payment made towards 50% of the cost of moulds was made in the year 2003-04 i.e. prior to dispute period of 2005-06. He pointed out that during the period 2003-04, the agreement of manufacture dated 24.01.2003 was on “Buy-sell‟ model. The said transaction of 50% of cost of mould was part of the agreement dated 24.01.2003. Since the said agreement was more than two years before the disputed period, there is no link shown by revenue between the said cost of mould by the appellant and the goods cleared during the disputed period. However, the cost of moulds needs to be apportioned on the value of clearances from the period 24.01.2003 to the time the said mould were used to manufacture goods for ITC - It is also noticed that the ITC has supplied gifts valued at Rs.1.5 Crores which are to be backed with the products manufactured by LHL is free gifts to be supplied to the customers. The ITC has deputed certain employees by Leamak. The role of the employees was coordination of dispatches of material to various godowns, supervision of quality of raw material, packing material and finished goods - the staff deputed not for the purpose of manufacturing the goods but only for the purpose of inspection and supervision and quality control cannot be part of the assessable value of the goods. M/s. LHL and ITC have contended that the amount of Rs.1,72,69,155/- which as been sought to be included in the assessable value is the value which the appellant have already included in the assessable value, fresh inclusion of the said in the assessable value amount to double taxation. The cost of production not included by Leamak has already suffered excise duty and the appellants have not contested the same. The contention of the appellant is that the duty has been sought to be recovered twice on this value. From the letter of the appellant dated 18.03.2015, it appears to be factually correct however this needs to be verified. It is seen that revenue has filed appeal seeking assessment under Rule 7 of the CV Rules. It is seen that the order of tribunal dated 01.01.2014 has clearly laid down that assessment has to be done in terms of Rule 11 of the CV Rules. The revenue has not challenged the said order and therefore, the said order has become final. In this background, the assertion of the revenue that assessment needs to be done in terms of Rule 7 of the CV Rules cannot be accepted - The appeal of revenue is therefore dismissed. The impugned order is also set aside in so far as it seeks to include the fixed cost of ITC in total to the assessable value. The cost of ITC in so far as it relates to provision of mould on discounted rate to the appellant needs to be apportioned to the value of goods depending on the actual period of use of the said mould and the total production. The fact regarding payment of duty under the head “Cost of production not included by Leamak” needs to be ascertained. If duty has already been paid, duty may not be demanded again. Penalty - HELD THAT:- It has been argued that the order passed in the instant case is imposing penalty on M/s. ITC Ltd is without following the principles of natural justice and on that count as well the impugned order cannot be sustained. There are merit in the argument of M/s. ITC Ltd. that when the impugned order imposed penalty on the appellant, they should have been granted an opportunity of defend themselves. The impugned order is set aside and matter is remanded to the Commissioner for fresh adjudication.
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