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CX - Rule 6 of Valuation Rules, 2000 - Design is 22 years old where copyright is not applicable and it was available in public domain, so, 'nil' value can be added: CESTAT

By TIOLNews Service

NEW DELHI, OCT 03, 2017: THE brief facts are that the appellants were engaged in manufacture of casting items, un-machined steel castings and base assembly and other machinery parts of Chapter 73. Their main customer is Bhilai Steel Plant of the Steel Authority of India Limited.

In the tender process, the appellants were required to manufacture the items as per specification and subject to the satisfaction of the customer. Such drawings were 22 years old and were also available in public domain on the internet. It has no value even as per the certificate of the Chartered Engineer.

However, the department viewed that the Valuation Rules will have to be applied on the free supply of the design. Inasmuch as the department took 15% value of the design and added it to the value of the goods.

The appellants are before the CESTAT.

The decision of the Bench in the case of Simplex Engg. & Foundry Works Pvt. Ltd. (Final Order No. 51000-51001/2015 dated 18.2.2015) was adverted to by the appellant and where it is concluded - "While cost of drawings and designs as 10% of the value of the goods adopted by the department is arbitrary, unreasonable and without any basis and same cannot be accepted, the Commissioner while rejecting the value claimed by the appellant based on the chartered engineer certificate has to given reasons for the same."

The AR justified the impugned order by reiterating that the drawings/designs were supplied to the appellant by the customer.

The Bench observed -

"6. …, we are of the view that the value of the design will have to be added to the value of the goods as per Rule 6, Explanation-I of the Central Excise Valuation Rules, 2000. In the instant case, the design is about 22 years old where copyright is not applicable and it was available in the public domain. So, "nil" value can be added. To this effect, the Chartered Engineer has given the certificate…"

Concluding that there is no reason to sustain the impugned orders, the same were set aside and the appeals were allowed.

(See 2017-TIOL-3555-CESTAT-DEL)


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