At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore
By, THE HONORABLE JUSTICE: S.S. GARG
By, MEMBER AND THE HONORABLE JUSTICE: ASHOK K. ARYA
For Petitioner: Raghavendra, Advocate And For Respondents: Pakshirajan, AR
1. The present appeal is directed against the impugned order dated 27.2.2004 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that the appellant are engaged in the manufacture of electric wires, cables and connectors falling under Chapter 8544 and 8536.90 of Central Excise Tariff Act, 1985. During the course of audit, the Department f
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ound that the appellants are clearing wires and cables through M/s. Farcom Marketing Services Inc. and apart from realization of payment as per the Bills, they were also receiving amount as royalty under an agreement. The department was of the view that the amount collected in the guise of royalty was nothing but part of sale consideration. On these allegations, a show-cause notice dated 28.7.2003 was issued and after following the due process, the Joint Commissioner i.e., adjudicating authority confirmed the demand vide Order-in-Original dated 13.10.2003. Aggrieved by the said order, the appellant filed appeal before Commissioner (A) and the Commissioner (A) also rejected the appeal of the appellant and upheld the Order-in-Original, hence, the present appeal.
3. Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without considering the facts and law on the point. He further submitted that the Commissioner (A) has gone beyond the scope of show-cause notice and the Commissioner (A) has failed to note that the royalty amount was received only in connection with the permission given by them to the marketing company for using the name Farcom for their company. There is no connection at all of this royalty amount with the manufactured goods and sold by the appellant-company. He further submitted that the marketing agency is not only selling the appellant's goods but also goods belonging to various other companies. He further submitted that the findings returned by the Commissioner (A) are based on assumptions and presumptions and there was no nexus between the amount received and the sale of goods. The learned counsel further submitted that the appellant entertained a bona fide belief that the royalty amount received by them does not form part of the transaction value as the said amount was received in connection with permitting the agency to use the name Farcom for their trading purposes. He also submitted that there is no suppression on the part of the appellant with intention to evade payment of duty.
5. On the other hand, the learned AR reiterated the findings of the impugned order and submitted that the learned Commissioner (A) has given reasons for holding that the royalty amount should be added in the assessable value and the appellant is liable to pay duty on them.
6. After considering the submissions of both the parties and perusal of the impugned order, we find that there is no infirmity in the impugned order whereby the learned Commissioner (A) has come to the conclusion that the royalty recovered is an additional consideration and hence, form part of the assessable value. Though, we find that there is no relationship between the appellant and the marketing company and the marketing company is also dealing with other goods like switches and the departmental investigations revealed that these products are not marketed under the brand name Farcom. Further, we find that since the appellant has not suppressed the facts from the Department and entertained a bona fide belief that the royalty amount is not to be included in the assessable value, therefore the extended period of limitation is not invokable. Further, we find that the appellant is also not liable to pay the penalty in view of the fact that there was no intention to evade payment of duty. Therefore, in our considered view the appellant is only liable to duty for the normal period and not for the extended period. Therefore, we partly allow the appeal of the assessee by holding that he is liable to pay the duty for the normal period. It has also come on record that the appellant has already paid an amount of Rs. 1,31,393/- being the duty on the royalty charges in their CENVAT account. The original authority will determine the duty keeping in view the fact that he is liable to pay the duty for the normal period of one year. Consequently, the appeal is partially allowed