Jurisprudentiol–Tomorrow's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Valuation – Motor vehicle parts – cost of design and drawings to be included in Assessable Value – mistaken view by assessee and Department – no suppression and extended period of limitation: CESTAT

THESE 85 Appeals filed by the Department and 29 Cross Objections filed by the Respondents have been taken up together for hearing and disposal, which relate to two impugned Orders-in-Appeal passed by the lower Appellate Authority and deal with a common issue.

It is pertinent to note that though such a large number of vendors were manufacturing and supplying the components to M/s. Tata Motors over a long period, and in respect of which M/s. Tata Motors have been taking credit of input duty, the Departmental Authorities themselves had not raised the issue at any point of time earlier that the value of drawings and designs should be included in the assessable value of the components. This has also not been done after introduction of the new Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 specifically providing for addition to be made to the value towards drawings, designs etc., supplied free. As such, Tribunal was of the view that the escapement of the additional duty for the impugned period was not on account of suppression, misstatement etc, but on account of a mistake of law on the part of the assessees as well as the Departmental Authorities. Hence, while holding that the cost of drawings and designs @0.085%, as provided by M/s. Tata Motors, is includible in the assessable value of the components, Tribunal held that the demand for the same can only be sustained for the normal period of limitation

Income Tax

Royalty paid to non-resident for use of brand name NIKE - It is revenue Expenditure and not Capital expenditure as there was no transfer of technical knowhow and payment of royalty was only for licensed use of trademark: ITAT

IT was made clear as per clause 6 of licence agreement that the trade marks, registrations, applications, goodwill associated with them would remain exclusive property of licensor. As per clause 15 it was further provided that in the event termination of agreement the licensee (i.e. the assessee) was supposed to deliver within 20 days of termination notice all the goods and items bearing trade mark, the confidential information in the form of drawings, designs including the copies made to the license. It was made clear that the assessee would not have any right whatsoever to use the technical information and the trade mark after termination of the agreement."; the CIT(A) in his well reasoned and well discussed order has rightly deleted the impugned addition made by AO by holding that the royalty expenditure involved in the instant ground of appeal is revenue expenditure and not capital expenditure.

Customs

DEPB Scrip was issued by DGFT - even if there was any condition to Brand Approval letter that had been not complied with, Dy Commissioner of Customs had no authority to sit in judgment over DEPB credit allowed by DGFT: Tribunal

IT was for the DGFT which issued the Brand Approval Letter to the appellants, to verify the records and to find out whether any condition attached to the BAL had not been complied with. It was not open to the Deputy Commissioner of Customs to sit in judgment over the quantum of DEPB credit allowed by DGFT under the licence in question. He could, at best, convey the results of his verification to the licensing authority.

See our columns Tomorrow for the judgements