2012 (7) TMI 385 - AT - Central Excise

Non-inclusion of the amount received for Digital and Pulsation Study conducted - Held that - It is on record that the appellant is not conducting this study and charging separately for all gas compressors, number of machines manufactured and sold by him during the relevant period and subsequently also - any study or additional tests conducted by the manufacturer at the option of the assessee, value/cost thereof need not form a part of the assessable value, as the same being optional - assessee has made out a case in his favour on the point of limitation as non-declaration of collection of charges of DPS in RT 12 should not be held against them, as they could entertained a bonafide belief, as it is done only in respect of few customers.

Summary

Issues:
Non-payment of Central Excise duty on Digital and Pulsation Study report. Appeal against Order-in-Appeal No.192/2006(Ahd-II)CE/Raju/Comr(A), dt.22.6.06. Appellant's contention on the relation of the study to manufacturing activity. Appellant's argument on limitation. Lower authorities' decision on the inclusion of study value. Bonafide belief of the appellant. Tribunal's decision on the appeal.

Analysis:
The case involved the appellant, engaged in manufacturing LPG and CNG compressors, facing a duty demand of Rs.1,92,000 for not paying Central Excise duty on a Digital and Pulsation Study report amounting to Rs.12,00,000. The study was conducted at the request of customers to enhance machinery efficacy. The appellant argued that the study was not connected to manufacturing and was optional for customers, thus should not be included in assessable value. The appellant also contended that the demand was hit by limitation as they believed the study had no relation to manufacturing. The first appellate authority upheld the duty demand, leading to the appeal.

The appellant's representative argued that the study aimed to find solutions to compressor efficacy issues without altering the design, solely focusing on pipeline modifications. They emphasized that the study was customer-requested and optional, not constituting an excisable activity. On the limitation aspect, the appellant claimed a bonafide belief in the study's non-connection to manufacturing, hence non-disclosure. The revenue side argued for the inclusion of study value based on subsequent actions by the appellant, contrasting the non-inclusion during the relevant period.

The Tribunal analyzed the submissions and records, focusing on the appellant's contestation for the period of May 2000 regarding the study value's non-inclusion. It noted the appellant's subsequent inclusion of the value to avoid further disputes with the revenue. The Tribunal acknowledged the appellant's bonafide belief during the relevant period, supported by past Tribunal decisions favoring non-inclusion of optional studies in assessable value. Consequently, the Tribunal found merit in the appellant's argument on limitation, setting aside the impugned order solely on that ground, allowing the appeal.

In conclusion, the Tribunal allowed the appeal based on the limitation issue, highlighting the appellant's bonafide belief and past Tribunal decisions supporting non-inclusion of optional study charges in assessable value. The decision provided relief to the appellant against the duty demand, emphasizing the importance of considering bonafide beliefs and past legal precedents in such cases.