2018 (2) TMI 1752 - AT - Central Excise

Excisability - supply and apply contracts which involved both consumption of paints manufactured by the appellant and also application thereof - appellants took a view that excise duty is required to be paid only on that element of cost representing the value of paints and not on the value relating to application of paints. Held that - The Bench in appellant own case M/S COROMANDEL PAINTS LTD. VERSUS CCE & CC, VISAKHAPATNAM 2016 (6) TMI 1018 - CESTAT HYDERABAD has held that since sale of paint is linked to the application part of the paint at the customer s site, the application is in relation to the goods and therefore, except the value of the labour component for application no other component can be deductible from the sale value for arriving at assessable value. Penalties u/s 11AC - Held that - The matter involved interpretational dispute - There is also no allegation that appellant suppressed the methodology adopted by them - penalty not warranted. Appeal disposed off.

Summary

Issues:
Excise duty on supply and apply contracts; Interpretation of Section 11AC for penalties.

Analysis:
The dispute in this case revolves around the payment of excise duty concerning supply and apply contracts, where the appellant contended that excise duty should only apply to the cost of paints and not the application of paints. The Tribunal referred to a previous decision by the same Bench in the appellant's own case, where it was held that the application of paint at the customer's site is linked to the sale of paint, making the application part of the goods. Therefore, only the labor component for application can be deducted from the sale value for determining the assessable value. The Tribunal upheld this ratio and found no reason to deviate from it, settling the issue regarding excise duty calculation.

Regarding penalties under Section 11AC, the matter involved an interpretational dispute between the department and the appellant, as well as the methodology for determining the assessable value. The Tribunal noted that there was no allegation of the appellant suppressing the methodology used by them. Consequently, the Tribunal concluded that the requirements of Section 11AC were not met in this case, and thus, no penalty could be imposed under that Section. As a result, the appeal was disposed of based on the above findings, and the decision was pronounced and dictated in open court.