2018 (4) TMI 898 - AT - Central Excise

Valuation - supply of Hydrogen gas through pipeline - inclusion of maintenance and operating charges on pipeline owned and maintained - Held that - the operation and maintenance of pipe line is not related with transportation charges and hence are includible in assessable value - the purchase order issued by the NOCIL mentioned that the gas will be transported through pipe line and maintenance charges will be paid separately and the rates are ex-factory. Thus the demand on merit is sustainable. Extended period of limitation - Held that - in absence of any fact showing malafide intention of Appellant to evade payment of duty, the demand raised by invoking extended period is not sustainable. Penalty u/s 11AC also set aside. Appeal allowed in part.

Issues:
Assessable value including maintenance and operating charges for pipeline, Time-barred demand, Suppression of facts, Applicability of judgments on transportation charges, Extended period demand, Penalty under Section 11AC.

Assessable value including maintenance and operating charges for pipeline:
The appellant, a manufacturer of excisable goods, supplied hydrogen gas to another company through a pipeline and charged maintenance and operating fees for the pipeline. The issue revolved around whether these charges should be included in the assessable value. The appellant argued that the pipeline was solely for gas transfer, not for gas manufacture, citing a Supreme Court judgment on the non-inclusion of freight in assessable value. The revenue contended that the charges were for maintenance and operation of the pipeline and should be included. The tribunal found that the operation and maintenance of the pipeline were not related to transportation charges and thus should be included in the assessable value. However, as no evidence showed the appellant's intention to evade duty payment, the demand raised under the extended period was deemed unsustainable. The tribunal upheld the demand for the normal period but set aside the rest of the demand.

Time-barred demand:
The appellant argued that the demand was time-barred as their records were audited periodically, and they did not suppress any facts. The revenue claimed that the appellant suppressed the facts by not disclosing the charges, making the demand valid under the extended period. The tribunal found that since the appellant's records were audited, and the charges were mentioned in purchase orders, there was no evidence of malafide intention to evade duty. Therefore, the demand under the extended period was deemed unsustainable.

Suppression of facts:
The revenue contended that the appellant suppressed the maintenance and operating charges by not disclosing them to the department. However, the tribunal found that since the charges were mentioned in purchase orders and the appellant's records were audited, there was no evidence of intentional suppression to evade duty payment.

Applicability of judgments on transportation charges:
Both parties cited judgments related to transportation charges to support their arguments. The tribunal analyzed the facts of the case and determined that the operation and maintenance charges for the pipeline were distinct from transportation charges, leading to a decision to include these charges in the assessable value.

Extended period demand:
The revenue invoked the extended period for the demand, alleging suppression of facts by the appellant. However, the tribunal found no evidence of malafide intention to evade duty, leading to the conclusion that the demand under the extended period was not sustainable.

Penalty under Section 11AC:
The tribunal set aside the penalty imposed under Section 11AC due to the lack of evidence showing malafide intention on the part of the appellant to evade duty payment. The decision was based on the absence of any facts indicating intentional suppression of information regarding the maintenance and operating charges.

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