SC gives relief to Mysore Kirloskar

In a relief to Mysore Kirloskar, the Supreme Court has ruled that the manufacturing company is not liable to pay excise duty on a consideration received from ITC to supply engineering machines with definite specifications.


Mysore Kirloskar had entered into an agreement with ITC in May 1991 for manufacture of certain engineering machines and had received an advance of Rs 43 lakh towards drawings, patterns, jigs, fixtures and tools etc developed by it.
The Commissioner of Central Excise had demanded a duty of Rs 7.41 lakh from the company besides imposing penalty of Rs 75,000 on the advance paid by ITC.
While confirming the Customs Excise and Gold (Control) Appellate Tribunal, Bangalore, judgement that set aside the penalty, a bench of Justices Ashok Bhan and J M Panchal said that the agreement was not merely for the preparation of design and drawings, but a total contract for design, drawing, manufacture of prototype, supply of the machines and payment of excise duty, etc.
"The contract could not have been read in isolation in parts, that is to say that the respondent (Kirloskar) had separately agreed to supply designs, drawings etc and also separately agreed to supply machinery," it added.
"Before adding the value of the drawing etc., it has to be established that the consideration had a nexus with the negotiated price of the assessable goods under clearance, i.e. machines in the instant case," the bench said.
Without establishing any such nexus, the Commissioner of Central Excise could not have demanded the duty on the additional amount of Rs 43 lakh, according to the court.
New Delhi, PTI :
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