2018 (8) TMI 1079 - AT - Central Excise

Valuation - inclusion of charges of repairing for which the appellant is raising debit notes - Department has demanded duty on the amount of debit notes which is for repairing of old and used engine on the ground that it is an additional consideration - Held that - The debit notes raised by the appellant is in respect of the engines supplied more than 3 years back and subsequently they have received the said engine as defective only for repair for which debit note was raised. This activity is limited to repair of old and used engines, which has nothing to do with the manufacturing of the engine which was supplied long back. Therefore, the debit note is for repair which cannot be treated as additional consideration towards the sale of the engine which was made long back. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to pay duty on the repairing of old and used engines?
2. Whether the repairing of old and used engines constitutes additional consideration towards the sale of new engines?

Analysis:

Issue 1: The appellant, engaged in manufacturing engines, raised debit notes for repairing old and defective engines supplied by M/s. Kirloskar Oil Engine Ltd. The department demanded duty on the amount of debit notes, claiming it as additional consideration. The appellant argued that the repairing activity is unrelated to the manufacturing of new engines. The Tribunal found that the repairing was limited to old and used engines, not connected to the manufacturing of new engines supplied long back. The Tribunal held that the appellant is not liable for duty as the repairing activity does not constitute additional consideration towards the sale of the old engines.

Issue 2: The appellant contended that the repairing of old and used engines should not be considered as additional consideration towards the sale of new engines. The Tribunal agreed with the appellant, emphasizing that the repairing activity was solely for old and used engines, distinct from the manufacturing of new engines. The Tribunal referenced a previous judgment in the case of Indian Card Clothing Company Ltd., which supported the appellant's position. Additionally, the Tribunal distinguished the judgment cited by the Revenue, stating it pertained to manufactured goods supplied, not applicable to the present case. Consequently, the impugned order demanding duty was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the repairing of old and used engines by the appellant did not attract duty as it did not constitute additional consideration towards the sale of new engines. The decision was based on the specific facts of the case and relevant legal precedents, ultimately leading to the setting aside of the impugned order.