2014 (4) TMI 650 - AT - Central Excise

Valuation of goods - Inclusion of testing charges - whether the testing charges for the customer s tonners which according to the Respondent are optioned, are part of the transaction value of the goods - Held that - During the period w.e.f. 01.07.2000, under Section 4(1)(a), the assessable value of the goods, on each removal, shall, in a case where the goods are sold by the assessee, for delivery at the time and place of removal to unrelated buyers and price is the sole consideration for sale, is the Transaction value - any amount that the buyer is liable to pay to or on behalf of assessee for the reason of or in connection with sale would cover the amount paid or payable by the buyer for the goods, only for the expenses which contributed to the value of the goods or are necessary to make the goods marketable and this expression would not include the amounts paid by the buyers for something which has no nexus with the emergence of marketable goods or does not contribute to the value of the goods up to the point of sale from the place of removal. Thus if some goods become marketable and can be sold only when packed in certain type of containers and testing of those containers is mandated by law, the testing charges of those containers would be includible in the value along with the cost of such containers if the containers are of durable and returnable nature, the amortized cost of the container including testing charges during the period of use would be includible in the assessable value - Cylinder testing charges are not includible in the assessable value of the liquid chlorine and there is no infirmity in the impugned order - Decided against Revenue.

Summary

Issues involved:
1. Inclusion of testing charges in the assessable value of goods under Central Excise duty.

Detailed analysis:
The case involved a dispute regarding the inclusion of testing charges in the assessable value of liquid Chlorine sold by the respondent, who are manufacturers of various chemicals chargeable to Central Excise duty. The Revenue contended that the testing charges for tonners used to transport Chlorine should be included in the assessable value of the Chlorine. The Assistant Commissioner upheld this view, considering the testing charges as part of the transaction value. However, the Commissioner (Appeals) set aside this decision based on a Tribunal judgment in a similar case involving Caustic Soda, where it was held that testing charges for containers are not includible in the assessable value of the goods.

The main issue revolved around whether the testing charges for tonners used to transport the goods should be considered as part of the transaction value under Section 4 of the Central Excise Act. The Revenue argued that the testing charges should be included, citing precedents and Supreme Court judgments. On the other hand, the Respondent contended that the testing charges were optional and not directly related to the sale of Chlorine, as they were charged only when Chlorine was supplied in customers' tonners upon request for testing.

The Tribunal analyzed the relevant legal provisions under Section 4 of the Central Excise Act, particularly the definition of 'transaction value.' It highlighted that any amount paid by the buyer for expenses necessary to make the goods marketable should be included in the assessable value. However, charges that do not contribute to the value of the goods or are not essential for making the goods marketable should not be included. The Tribunal referred to previous Supreme Court judgments regarding the inclusion of packing charges in the assessable value to support its interpretation.

Based on the facts of the case and the legal principles discussed, the Tribunal concluded that the testing charges for tonners used to transport liquid Chlorine should not be included in the assessable value of the goods. It emphasized that the testing charges were optional and not directly linked to the sale of Chlorine, as the customers could have chosen to get the testing done elsewhere. Therefore, the Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner (Appeals) and the Tribunal's previous judgments in similar cases.