2016 (3) TMI 1039 - AT - Central Excise

Liability to Central Excise duty on the amount received, from buyers of electronic exchange, towards erection/ installation/commissioning charges - Held that - We notice first of all it is an optional activity. There is no allegation of artificial splitting of sale value or transaction value towards material and installation. We find the electronic exchanges are cleared as full equipment on payment of duty to the buyer s premises for installation and commissioning. We also find that the Tribunal had occasion to examine the same issue in respect of the same appellant 2013 (8) TMI 846 - CESTAT NEW DELHI for earlier period wherein held as merely because the said activity is being undertaken by the supplier of the goods does not mean that the consideration for the same has to be added in the assessable value of the goods. In any case, the appellant has already discharged their service tax liability in respect of the said consideration, in which case the same cannot be taxed to Central Excise duty - Decided in favour of assessee

Summary

Issues:
1. Inclusion of installation and commissioning charges in the assessable value for Central Excise duty.

Analysis:
The appeal in question challenged an order by the Commissioner (Appeals) regarding the inclusion of installation and commissioning charges in the assessable value for Central Excise duty. The appellants, engaged in manufacturing digital switching electronic exchange equipments, had contracts with BSNL for supply of such equipment. The dispute arose when the Original Authority confirmed a demand for Central Excise duty on installation and commissioning charges of the exchanges cleared by the appellants. The Commissioner (Appeals) upheld this decision, leading to the filing of the present appeal.

The appellants argued that they had already discharged Central Excise duty based on the transaction value for the goods sold. They highlighted that installation and commissioning were optional activities, and the charges collected were not related to the clearance of fully finished goods. Additionally, they pointed out that the process of erection and commissioning at the customer's site did not amount to manufacturing. The appellants also emphasized that they were paying service tax on the amount received for erection and commissioning, and cited relevant case laws supporting their position.

On the other hand, the learned AR supported the findings of the Original Authority, asserting the liability of the appellant for Central Excise duty on the amount received for installation and commissioning charges. However, upon examination of the appeal records, the Tribunal found that the charges in question were for optional activities and there was no artificial splitting of sale value. The Tribunal referred to a previous judgment involving the same appellant, where it was established that the consideration for installation and commissioning, for which service tax was already paid, could not be taxed under Central Excise duty. Consequently, the Tribunal concluded that the original order was unsustainable and allowed the appeal.

In summary, the Tribunal ruled in favor of the appellant, holding that the charges for installation and commissioning, for which service tax had already been paid, were not subject to Central Excise duty. The judgment emphasized the distinction between the supply of goods and installation activities, highlighting that the consideration for installation, when already subjected to service tax, could not be additionally taxed under Central Excise duty.