2017 (12) TMI 283 - AT - Central Excise

Valuation - inclusion of cost of bought out items - Freight - place of removal - case of Revenue is that the entire said receipt at the customers premises constitute the powder coating plant and since the customers premises is the place of removal, value of all bought out items is to be included for the purpose of assessment - Held that - it is not in dispute that the Revenue is seeking to include the cost of bought out items supplied directly to site for the purpose of charging Central Excise duty. It is not in dispute that no manufacturing activity in respect of such items has been done by the appellant - The liability to Central Excise duty arises only when there is a manufacturing activity undertaken and in the absence of manufacturing activity the liability of Central Excise does not arise. Similar issue decided in the case of COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY Versus ACER INDIA LTD. 2004 (9) TMI 106 - SUPREME COURT OF INDIA , where it was held that Excise duty would be leviable only on the goods which answer the definition of excisable goods and satisfy the requirement of Section 3. A machinery provision contained in Section 4 and that too the explanation contained therein by way of definition of transaction value can neither override the charging provision nor by reason thereof a goods which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of service tax on bought out items supplied directly to site for incorporation into plants.

Analysis:
The appeal was filed against the confirmation of demand of service tax on bought out items supplied directly to site for incorporation into plants. The appellant, engaged in the manufacture of Powder Coating Equipment and Spares, argued that the bought out items were not part of the assessable value of goods cleared from the factory. The Commissioner confirmed the demand of Central Excise duty on the value of bought out items, considering the place of removal to be the customer's premises. The appellant contended that excise duty can only be levied on manufactured goods, not on trader's goods, citing various judgments. The Tribunal observed that the liability to Central Excise duty arises only when there is a manufacturing activity, and in the absence of such activity, the duty does not apply. Referring to previous decisions, the Tribunal emphasized that excise duty is chargeable only on excisable goods and not on goods that do not meet the definition of excisable goods.

The Tribunal referred to the decision in the case of Acer India Ltd., highlighting that excise duty is leviable only on goods that satisfy the definition of excisable goods. The Tribunal also cited the decision in the case of Emerson Network Power India P. Ltd., where it was noted that the cost of bought-out items required purely at the site cannot be included in the assessable value. Relying on these decisions, the appeal was allowed, emphasizing that excise duty cannot be charged on bought-out items supplied directly to the site for incorporation into plants, as they do not undergo manufacturing activity and do not meet the criteria for excisable goods.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal against the confirmation of demand of service tax on bought out items supplied directly to the site for incorporation into plants. The judgment highlighted the distinction between excisable goods and non-excisable goods, emphasizing that excise duty is chargeable only on goods that meet the definition of excisable goods and undergo manufacturing activity.