TMI Blog2013 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... - The inclusion of product development charges in the conversion charges for the job-worked medicaments, regardless of the fact that only some of the medicaments specified in the debit note were supplied by the job worker would ipso facto indicate the fallacy of the Department’s claim that the product development charges covered by the debit note were to be treated as part of the cost of conversion – Decided against revenue. - Appeal No. 388/389 of 2006 - - - Dated:- 5-3-2012 - Mr. P.G. Chacko and Mr. M. Veeraiyan, JJ. For the Appellant: Mr. Harish Chandra, Sr. Advocate and Ms. Rama Rani, Advocate For the Respondent: Mr. Ganesh Havanur, Addl. Commissioner (AR) JUDGEMENT Per: P.G. Chacko; This appeal of the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent demanding differential duty with interest and proposing penalties. The demand was contested. In adjudication of the dispute, the original authority confirmed the demand of duty against the assessee by holding that the above charges collected by them were essentially for the manufacture of the medicaments and hence should form part of the assessable value of the goods. It also imposed equal amount of penalty on the assessee under Section 11AC of the Central Excise Act besides another penalty of Rs.20,000/- on them under Rule 27 of the Central Excise Rules, 2001. Aggrieved, the assessee(respondent) preferred an appeal to the Commissioner(Appeals). The appellate authority accepted the assessees contention that neither of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80,000/- and Rs.5,76,000/- were debited to the account of the principal manufacturer/raw material supplier viz. M/s. SLL towards professional charges for quality control and inspection by our Senior Technical Executives for your products manufactured at out plant. A reference was also made to another debit note covering an amount of Rs.17,41,000/- collected by the assessee from the raw material supplier towards product development charges. This debit note provided the break-up of amounts debited to the account of the raw material supplier in relation to numerous medicaments specified in the debit note. The learned consultant submitted that, as a matter of fact, some of these medicaments were not manufactured and supplied to M/s. SLL, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... + cost of conversion (labour charges) including profit margin). This factual position is amply clear from an observation made in the impugned order by the learned Commissioner (Appeals), which reads thus: It is not the case of the department that any of the ingredients that are essential for valuing goods on job work has been left out. The appellant has no grievance against his observation made by the lower appellate authority. The learned Commissioner (Appeals) also clearly found that the assessee had taken into consideration the cost of raw materials + packing charges + conversion charges for valuation of the goods. He further noted that the conversion charges included the element of profit. These findings have not been challenged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal manufacturer s account, but only some of the specified medicaments were manufactured and supplied by the respondent. This fact has not been disputed before us. Yet, the aforesaid amount of Rs.17.41 lakhs collected by the assessee from the principal manufacturer towards product development charges has not been amortised. In our view, the inclusion of product development charges in the conversion charges for the job-worked medicaments, regardless of the fact that only some of the medicaments specified in the debit note were supplied by the job worker, would ipso facto indicate the fallacy of the Department s claim that the product development charges covered by the debit note are to be treated as part of the cost of conversion. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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