Notional Cost Of Maruti's Free Designs Supplied To Vendors Not Dutiable Under Central Excise: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that notional cost of Maruti's free designs supplied to vendors not dutiable under Central Excise.

The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) was addressing the issue whether the notional cost of drawings and designs supplied free of cost by Maruti to the vendor should be included in the assessable value of parts or components manufactured by vendor and cleared to Maruti for the purpose of payment of central excise duty.

In this case, the vendor of Maruti Suzuki India Limited is engaged in the manufacture of motor vehicles and procures the desired parts and components from vendors.

According to the vendor, parts or components, being an engineering product, are required to be made as per the requirement of Maruti and it is for this reason that Maruti provides the specifications of the parts or components in the form of drawings free of cost to the potential vendors and seeks quotations.

Once the vendor is selected and a letter of intent is issued, the vendor prepares detailed drawings and designs for the products to be supplied, corresponding to the specifications received from Maruti.

The final products are then manufactured with the help of detailed drawings and designs prepared by the vendors.

According to the vendors, the cost incurred by them towards the manufacturing activity includes the development cost incurred in the preparation of the detailed drawings and designs by them.

As per the department the cost of the specifications supplied by Maruti to the vendor free of cost should be included in the assessable value of the final products manufactured by the vendors in terms of rule 6 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002.

The bench referred to the earlier decision in Denso India Private Limited versus Additional Director General (Adjudication) Excise Appeal No. 52419 of 2022 where it was held that notional cost of drawings and designs supplied free of cost by Maruti to the vendors cannot be included in the assessable value of the parts and components manufactured by vendors and cleared to Maruti for the purpose of payment of central excise duty.

In view of the above decision, the Tribunal allowed the appeal.

Case Title: M/s Bosch Ltd. v. Commissioner of CGST & Central Excise, New Delhi

Case Number: Excise Appeal No. of 50587 of 2025

Counsel for Appellant: S.C. Vaidyanathan

Counsel for Respondent: Rakesh Agarwal

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