2004 (3) TMI 489 - AT - Central Excise

Summary

Issues:
- Inclusion of hydraulic testing charges in the assessable value of manufactured products.

Analysis:
1. The main issue in this appeal was whether hydraulic testing charges collected by the assessee from its customers should be added to the assessable value of caustic soda, hydrochloric acid, hydrogen gas, and liquid chlorine manufactured by the assessee. The Commissioner (Appeals) referred to Board's Circular No. 7/89-C.E. and a Supreme Court decision to support the view that such charges should not be included in the assessable value.

2. The respondent, engaged in manufacturing various products, conducted hydraulic tests on tonners before filling gas into them, collecting charges from customers for this service. The Revenue sought to add these testing charges to the assessable value, arguing that the testing was an essential part of the manufacturing process. The adjudicating authority upheld the demand and imposed a penalty.

3. The Commissioner (Appeals) relied on Board's Circular No. 7/89-C.E. and the Supreme Court decision in Collector of Central Excise v. M/s. Century Spinning & Mfg. Co. to conclude that hydraulic testing charges should not be included in the assessable value of the products.

4. The Departmental Representative contended that the circular and the Supreme Court decision were not applicable in this case, asserting that since the hydraulic test was conducted on tonners before filling them with gas, the testing charges should be part of the assessable value. The Tribunal, after hearing both sides, considered the arguments.

5. Referring to the Supreme Court decision in Century Spinning & Mfg. Co. Ltd., the Tribunal highlighted that charges related to durable and returnable containers should not be added to the assessable value of the gas manufactured and supplied. Board's Circular 7/89-C.E. also clarified that charges for durable containers need not be included in the assessable value.

6. The Tribunal agreed with the Commissioner's view that hydraulic testing charges were not connected to the manufacturing process of caustic soda, etc. Since the charges were for a separate activity, the Tribunal found no error in the Commissioner's order and dismissed the Revenue's appeal. The principle applied was that charges for activities unrelated to manufacturing should not be included in the assessable value.