Fritzmeier Motherson Cabin Engineering Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Summary: CESTAT Chennai allowed the appeal of Fritzmeier Motherson Cabin Engineering Pvt. Ltd. and set aside in entirety the excise duty demand of Rs.22,49,164/- for October 2010 to March 2015, together with interest and equivalent penalty under Section 11AC. The dispute concerned designs and drawings supplied free of cost by customers to the appellant, a manufacturer of motor vehicle cabins and cabin parts. The Department had treated their value as additional consideration under Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
The Tribunal held that a free supply does not by itself displace the condition that price is the sole consideration. Revenue was required to establish that the drawings satisfied the conditions of Explanation 1 to Rule 6, including that they were used in or necessary for production and that their value had not already been included in the price. The record contained no finding establishing the actual nature or relevance of the drawings. The Tribunal distinguished mere customer specifications from detailed engineering drawings necessary for manufacture and held that Revenue had failed to establish the ingredients required for Rule 6.
