Only the amortized value of tools and dies must be included in the final products’ assessable value under Rule 6.

The appellant manufactured automobile parts and accessories for original equipment manufacturers.

For manufacturing these parts, tools, dies and moulds were either supplied free of cost by customers or manufactured/procured by the appellant and recovered from customers through separate invoices.

Where the customers supplied the tools, dies or moulds, the appellant included their amortised value in the assessable value of the final products; however, where the appellant itself manufactured or procured them and recovered their cost separately, it did not include their total or amortised value in the assessable value.

Following an audit for November 2015 to March 2017, the Department issued a show-cause notice demanding central excise duty on the entire value recovered for the tools, dies and moulds under Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

The original authority confirmed the demand, and the Commissioner (Appeals) upheld it, subject to limited verification and remand for determining whether goods had been removed as such after reversal of proportionate credit.

The appellant challenged that order before the Tribunal.

Whether the value of tools, dies and moulds used in manufacturing the appellant’s final products was required to be included in the assessable value under Rule 6 of the Valuation Rules and, if so, whether the entire value or only the amortised value was includible

Whether the tools and dies were exempt from central excise duty under Notification No. 67/95-CE on the ground that they were captively used within the appellant’s factory

Whether the extended period of limitation could be invoked and whether interest and penalty were recoverable

The Tribunal applied Rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, under which the value of goods, materials, components, tools, dies or moulds supplied or used in connection with the manufacture of excisable goods must be added to the transaction value where applicable.

The Tribunal held that, because tools and dies are used repeatedly, their amortised value, rather than their entire cost, must be apportioned over the final products manufactured using them.

Notification No. 67/95-CE, granting exemption for specified goods captively consumed within the factory, applies where the goods are used captively and their value is reflected in the value of the final products; it does not apply where the tools or dies are separately sold or their cost is recovered from customers through separate invoices.

The extended limitation period is sustainable where non-inclusion of the relevant value is attributable to suppression or wilful non-disclosure, and the appellant cannot claim bona fide belief when it had already included amortised tool and die values in comparable transactions.

The Tribunal found that the final products could not be manufactured without the tools, dies or moulds and that their value therefore had to be reflected in the assessable value.

Since the tools and dies were used repeatedly rather than consumed in a single manufacturing operation, Rule 6 required inclusion of only their proportionate amortised value in the value of the final products.

The appellant had already followed this method where customers supplied the tools, demonstrating its awareness of the valuation requirement; its failure to apply the same treatment where it manufactured or procured the tools and recovered their cost separately was therefore unjustified.

Separate invoicing to customers meant that the tools and dies could not be treated as exempt captive-consumption goods under Notification No. 67/95-CE.

However, because the Department had demanded duty on the entire value rather than the correct amortised value, the demand required recomputation.

Interest and penalty likewise had to be recalculated on the revised duty liability.

It held that the assessable value had to include the amortised value, and not the entire sale value, of the tools and dies used in manufacturing the final products.

The appeal was accordingly allowed by way of remand to the original authority to recompute the duty under Rule 6, determine the amortised value of the tools and dies, and consequentially recompute interest and penalty after following due process.