Excise Duty Not Leviable on Tools and Die Charges Based on Export of ‘Rough Forgings’: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no excise duty was leviable tools and die development charges based on the export of rough forgings. The Bench held that proceedings relate to the export of goods which was not subjected to Central excise duty. 

R. B. Forging (P) Ltd, the appellant assessee was engaged in the manufacture of Rough Forgings, Tractor Parts, and MV Parts and had cleared the goods for export both under Letter of Undertaking (LUT) without payment of duty as well as on payment of duty and claimed rebate or refund of duty paid. 

The assessee appealed against the order passed by the Commissioner (Appeals) of Central Excise for confirming the demand of excise duty of amount Rs. 9,96,674.00 along with interest and proposal for imposition of penalty. 

Gagan Kohli, the counsel for the assessee contended that once it is established that the goods manufactured out of the subject tools and dies were exported without payment of duty under the letter of an undertaking then there was no question of demand of duty on the value charged for the development of tools and dies. 

Further submitted that export under the letter of undertaking was different from export under rebate and was against the export policy because the exported goods are not subject to central excise duty and the entire situation was revenue neutral. 

Raman Mittal, the counsel for the department relied on the decisions made by the lower authorities and contended that the the amount was being charged in addition to the sale amount recovered from the parties and given Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000, tool and dies development charges form part of the assessable value as additional consideration and are thus liable to Central Excise duty. 

The Bench observed that the additional consideration which was to be included in the assessable value in terms of Rule 6 of the Central Excise Valuation Rules pertains to the domestic sale and not export of goods and was not applicable in the present case because here the entire proceedings relate to export of goods. 

The two-member bench comprising S.S Garg (Judicial) and Anjani Kumar (Technical) held that excise duty not leviable to tools and die charges based on export of rough forgings and quashed the excise duty demand raised by the department on the assessee while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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