2014 (6) TMI 854 - AT - Central Excise

Valuation of goods - inclusion of inspection charges - Held that - inspection is being carried out only in respect of sale to M/s. U.P. Jal Nigam. There is no inspection being carried out in respect of sales made to other persons. As such, it can be concluded that such inspection, which was got done from a third party, was on insistence of U.P. Jal Nigam and has got nothing to do with the marketability in the ordinary course. If the same was necessary for marketability of the goods, the same would have been carried out in 100% of the goods manufactured by the assessee. Inasmuch the said inspection is only in respect of sale to one party and inspection charges collected by the appellant from the said party are being paid to the inspecting authorities, we find no justifiable reason to hold that same would be part of the assessable value of the goods - Decided in favour of asessee.

Summary

Issues:
1. Deduction of equalized freight in assessable value.
2. Inclusion of third-party inspection charges in assessable value.

Analysis:

Issue 1: Deduction of Equalized Freight
The appellant, engaged in manufacturing PVC pipes, claimed deduction of equalized freight while supplying goods to the Government and private parties. The Commissioner (Appeals) allowed this deduction based on a Circular and judgments of the Tribunal and Supreme Court. The Revenue appealed this decision, but failed to challenge the Circular and judgments cited by the Commissioner. As a result, the Tribunal found no merit in the Revenue's appeal and rejected it, upholding the deduction of equalized freight in the assessable value.

Issue 2: Inclusion of Third-Party Inspection Charges
The disputed issue in the appellant's appeal was the inclusion of inspection charges in the value collected from a specific client, M/s. U.P. Jal Nigam. The client required inspections before accepting goods, which were conducted by third parties like RITES or DCS&D. The Commissioner (Appeals) ruled that these inspection charges should be included in the assessable value, leading to a demand and penalties. However, the Tribunal noted that inspections were only conducted for sales to M/s. U.P. Jal Nigam and not for other clients. This indicated that the inspections were specific to that client's requirements and not essential for the marketability of the goods in general. Therefore, the Tribunal set aside the Commissioner's decision, stating that these inspection charges should not be part of the assessable value. The appellant's appeal was allowed, providing consequential relief.

In conclusion, the Tribunal disposed of both appeals by upholding the deduction of equalized freight in the assessable value and rejecting the inclusion of third-party inspection charges in the assessable value, emphasizing that the specific inspections were not essential for the marketability of goods in general.