TMI Blog2016 (12) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the appellants duty paid is going to Avtec as a credit and again coming back as a credit to GMI when intermediate goods are received back. In such situation, we find the question of fraud, misrepresentation may not be sustainable. As such, we hold that that differential duty paid by GMI on FOC materials has correctly paid. However, the self adjustment of certain other excess payment against such differential duty is not permissible under the provisions of law and the same is not being contested by the appellants. We find, considering the facts and circumstances of the case, while we uphold the differential duty paid on FOC materials, imposition of penalty on this ground is not sustainable. Royalty fees - loading of 3% in the value of FOC materials on the ground of royalty fees paid by GMI to ISUZU - GMI entered into an agreement with ISUZU for drawing and specification and paid royalty charges for this - Held that: - We find that the loading at 3% is arrived at on the basis of total sale price of Cars vis a vis total royalty paid to ISUZU by GMI. We find that 3% loading is without any reason or logic as could be seen from finding of the Original Authority. We find that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Avtec to discharge central excise duty is not correct. The FOC materials supplied by GMI is not on the basis of proper valuation as the prices adopted by GMI appeared to be low on various grounds. Accordingly, proceedings were initiated against both the appellants resulting in the impugned orders. Original Authority held that the valuation followed by GMI to pay duty on FOC material supplied to Avtec is not correct. Consequently, the value adopted by Avtec to discharge duty on the various goods manufactured on job work and returned back to GMI is not correct. Differential duties were confirmed as proposed in the various demands. Penalties were also imposed on both the appellants. 2. The Ld. Counsel for the appellants submitted that GMI have recalculated themselves the differential duty payable on FOC materials and paid an additional amount of ₹ 2,71,43,012/- as differential duty. The differential duty occurred due to non-inclusion of Customs duty, ocean and inland freight charges in respect of FOC materials procured by GMI. They are not contesting this payment already made, except the effect that there can be no allegation of fraud, collusion to impose penalty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the intermediate product is duly used in the manufacture to final product by GMI, who discharged full duty liability. In the present case both the appellants independently involved in manufacture though on job work arrangements, chose to pay duty at the time of clearance of FOC materials by GMI and intermediate goods by Avtec. Hence, proper valuation has to be followed by both the parties in ascertaining the duty liability. Regarding the loading of value of FOC material on the ground of payment of royalty by GMI to ISUZU, the Ld. AR submitted that the technical knowhow is essential in the manufacture of intermediate as well as final product and hence, should form part of the value for Central Excise duty purposes. 8. We have heard both the sides and examined the appeal records. 9. On the general issue regarding correct valuation to be adopted for FOC material received from GMI and which become part of value of intermediate goods manufactured and cleared by Avtec on job work basis back to GMI, we find that they have chosen not to follow scheme in terms of Rule 4 of Cenvat Credit Rules, 2004. It is not for the appellant and the principal manufacturer now in this l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being contested by the appellants. We find, considering the facts and circumstances of the case, while we uphold the differential duty paid on FOC materials, imposition of penalty on this ground is not sustainable in view of the facts discussed above. 11. The only other main issue is regarding loading of 3% in the value of FOC materials on the ground of royalty fees paid by GMI to ISUZU. We find the reasoning and methodology while arriving at such percentage of loading by the original authority is devoid of merit. GMI entered into an agreement with ISUZU for drawing and specification and paid royalty charges for this. Admittedly, the agreement is in respect of technical information and support from ISUZU with reference to entire model of car and not for transmission assembly only. The agreement encompasses a host of activities for the entire vehicle, whereas in the present case Avtec are not engaged in the manufacture of entire vehicle and they are involved only in manufacture of certain intermediary transmission assembly etc. which goes into the manufacture of the vehicle. Further, we note provision of Rule 6 of Valuation Rules are applicable to situation where additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X
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